Family Business Succession Planning: Tips for Success When You’re Ready for Retirement
Owning a family business comes with many benefits. You’ve likely enjoyed your job and the fact that you’ve built something from the ground up for years. Whether you started the business yourself or you took over from another family member, having a business of your own is a great way to make a living.
If you want to keep your family business intact, it’s important to think about what might happen once you’re ready to retire. Even if you love your job, no one works forever. As a small business owner, preparing yourself for retirement includes having an exit strategy. When you own a family business, part of that includes naming a successor.
One of the potential drawbacks of a family operation is that it can easily feel more personal than other business formats. Emotions can run high, family members can feel slighted or offended, and some might not be ready to take on the task of running a business.
So, what can you do to make sure your business remains successful when you’re ready for retirement? How can you make succession planning easier for everyone involved?
Decide on a Successor
One of the first things you should do when preparing to step down is decide on who is going to take over. Sometimes, the choice is obvious. Other times, you might be stuck between a few different family members. Unfortunately, that can leave you in a difficult position. Family dynamics often make this kind of choice difficult, since you don’t want to hurt anyone’s feelings.
The best way to go about deciding on a successor is to take the family aspect out of it – as much as possible, anyway.
Your main goal should be for your business to succeed. The person you choose to take over needs to have the same goal and a plan to make it happen. For example, if you’re the CEO or CFO of your business, whoever you choose to take over should possess the same or similar skills. These are typically things like:
- Managing finances
- Being able to delegate
- Taking charge of professional development
Whoever takes over will also need to have the soft skills necessary to make sure the rest of your employees are doing their best.
If your son, daughter, or another relative wants to take over and knows the business well but doesn’t have the necessary skills, that doesn’t have to be a deal-breaker. If you truly think they’re the right person for the job, you might consider training them to take over. As the current leader of the company, it’s important to find a work-life balance, especially as you transition into retirement. Training a successor will allow you to transition at your own pace, and will help that person learn as they go, so you’ll know you’re eventually leaving the business in good hands.
Be Prepared for Difficult Conversations
When you decide on a successor based on experience and skill, it’s less likely for feelings to get hurt. But, there are still conversations to be had – and they may not all be pleasant. But, open communication is an important key to making the transition process easier for everyone.
It’s a good idea to have some discussion points before you start talking to your family about your succession plan. Thinking ahead and knowing what you’re going to say will help to keep everyone calmer. Plus, you’ll be more comfortable and prepared to answer questions. Some examples of strong talking points could include:
- The legacy you want to continue
- Opportunity vs. entitlement
- Compatibility for the business
It’s important to be as transparent as possible throughout these conversations. You might even want to have hard copies of information available for your family members so they don’t feel as though they’re being left in the dark. It’s estimated that of the family business owners who want to pass on their legacy to another family member, only 30% are successful with the transition. While several factors play into that, a lack of transparency is a major one. So, while these conversations might be hard, they’re also crucial.
Plan for Your Retirement
In addition to finding a strong successor, you should also take this time to think about what you want your retirement to look like. Planning to retire doesn’t automatically mean you’re “out” of the business forever. Many owners go through a lengthy transitional period. Some take on a lesser role in the business. Even if you do want to walk away from it completely, make sure you’re ready, and don’t let anyone make you feel like it’s “time” to go.
There are some things to consider before you retire, including how you’re going to manage your investments, what your plan is for spending, and even continuing healthcare coverage. It’s important to make sure you’re comfortable with those areas and you know how you’re going to take care of yourself before you step away from work. Retirement should be about enjoying yourself, not worrying about money.
Retiring from your family business can be emotional, and succession planning isn’t always easy. But, at the end of the day, when you’ve taken the time to pick the right person for the job, you can feel good about your continuing legacy, and enjoy your retirement years while knowing your business will remain intact and in the family.
This guest post was authored by Ainsley Lawrence
Ainsley is a writer who loves to talk about how business and professionalism intersect with the personal, social, and technological needs of today. She is frequently lost in a good book.