There has been substantial media focus on succession planning over the last few years, some chilling failures, and some inspiring success stories. However, a lot of family businesses struggle with it. On the one hand, there are all the layers of emotional connection to the farm/business and the family, the different expectations of everyone involved, and the instinctive feeling that it is all a bit hard to talk about so just hope that things will sort themselves out – more often than not it does not. On the other hand, there is the hard-edged detail of the financial statements and reports. What is the big picture and how does it sit with what you want it to look like in the future? The good news is that there are a lot of options however you do have to lay some groundwork.
Start the conversation
Sometimes it is not until you start talking that you realise how many people are really involved, how much they care about the future direction and what they see they can contribute. You cannot assume you know what they think until you start the conversation. And do not assume it will be just one conversation. A family meeting might be a good idea but to find out what people really want, some ‘one on one’ time might be useful.
It cannot be all about the bottom line but profitability is critical. The key is to make sure the older generation has enough to retire on and the next generation can make a go of the business.
Time to grow
Nothing happens overnight. Once you work out the vision for the future and the level of business profitability needed to achieve it, plan out the stages. The upcoming generation(s) need time to find their place in where the business is going and time to acquire skills and knowledge to keep the business growing. And they need support while they do it. The older generation needs time to grow accustomed to the idea of not being in the business 24/7. Retaining a steering presence in the business can help the transition and provide guidance to family members who are still learning.
Establish a formal process or structure to achieve strategic goals. Some people find the notion of having a Board confronting but a Family Advisory Board can be a way for everyone to share the information they need to understand the business, build a plan and make sure it stays on track. It can also be a forum for drawing in key experts – you might have us as your accountant, your banker, farm advisor, or lawyer as occasional or permanent members of the Board. Professionals can help with the technical stuff, input ideas, and be a sounding board.
It needs planning
Spadework for effective succession begins with open, clear communication. If you are a stakeholder, passionately invested in both the business and the family, maybe you are not the best person to open the communication and keep it flowing. It might work better to call on someone outside the family business who can suggest some guidelines and facilitate. A business mentor or professional advisor might be a good fit for this role.
Succession is much more than a plan about when someone is going to retire – it is a plan to keep the business growing and develop the expertise and leadership needed to give it the best chance of continued success. We can help you think about how you would like to go about it.
Disclaimer: The content of this article is intended for general information only and issued to readers as a guide and for their private information. Nick Hoogeveen & Associates website articles do not constitute advice and readers should not act solely on the basis of the material contained within this article. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of these areas.