Step by step Step by step Step by step

Succession planning is a journey. And for family-run businesses, it can be an exciting one, even when, as sometimes happens, it's marked by competing goals, difficult decisions and mixed emotions. The perfect plan may in fact not exist, but steps can be taken from the outset to put all family members on the path to a mutually beneficial transition to empower the future of family business. These are the steps I recommend:

1. Start the conversation: The decision to step down from a family business leadership role can be difficult. This is especially true for first-generation leaders who can be deeply attached to the business and connect their identity to its success, as my colleague Yannick Archambault recently wrote. As such, successful succession plans begin with open and honest dialogue between the first generation and their potential successors to set mutual goals and expectations. Only when all perspectives and concerns are considered can a family form a plan that will give everyone a clear vision of the organization's future and their role within it.

2. Establish a "north star": Even the best-laid succession plans are bound to have a few surprises. When obstacles arise, it's important to have an agreed-upon vision that all parties can use to get the process back on track. I often call this the "north star" because it keeps the family's values and goals in full view throughout the transition.

3. Make the plan: There is no "winging it" in succession planning. You need a roadmap that lays out the timelines and milestones ahead. Designing that plan begins with a thorough and honest evaluation of the business's strengths, weaknesses, opportunities, and threats (i.e., "SWOT" analysis) and an assessment of the gaps that need to be addressed before new leadership takes over.

Without a plan, family businesses risk missing key steps, setting impossible timelines, and leaving members behind. And when it comes to sitting down to create that plan, it is always beneficial to include an impartial third party who can serve as an unbiased source of advice and guidance throughout this fundamental process.

4. Form the team: With a succession plan in place, the next step is assembling a team that can carry it through. Here again, it helps to have third parties that can provide impartial support at every stage. The team must also consider the non-financial spouses and family members who will no doubt have their own roles to play in supporting their partners and keeping the family on track.

5. Make peace with the unpredictable: As I suggested, no plan is perfect. Whether the intent is to pass control to younger generations or sell to a new owner, there will be unforeseen obstacles that stand in the way of a smooth transition. These speedbumps are inevitable but surmountable with ongoing communication, the "north star" I talked about earlier, and a plan that makes room for flexibility.

These steps are all important during the early stages of a family business succession. So, too, however, is taking measures to avoid some common missteps that can trip up the process in the early days.

Firm up your footing

One such misstep is allowing rumours and assumptions to cloud the waters. Ask yourself: Does the first generation even want to step down? Is the second generation ready to step up? Is everyone being taken into consideration, and are they being given the skills and knowledge to succeed? If you don't know the answers, don't assume. Instead, ask these questions openly and leave no room for guessing.

Setting unrealistic timelines and milestones can also derail a transition or sale. The reality is that the succession of a family business can take years to play out; moving too fast can be detrimental to the process. Also, remember that long lead times are often needed to ensure that any gaps in skill and knowledge are being filled and that the second and third generations are prepared to make their move when their time comes.

Lastly, one of the most common misconceptions is that succession is an easy process. From my years of guiding family businesses through this complicated and emotional process, I can say with certainty that it rarely is. But that's ok: the most rewarding efforts are very often those that were the hardest to complete. Tough decisions will need to be made, expectations may change, and unforeseen challenges will emerge that can require going back to the planning board. Yet while these challenges may convince the first generation to avoid making the decision, going down this difficult path is ultimately more beneficial than not.

Now that we've examined tips for a successful start to succession, join us in future blogs to look deeper into the risk of avoiding succession planning, the emotions that can arise during the transition and the benefits of planning for the inevitable.