Key Issues in Succession Planning

Floral Finance®

Passing your business along to your children might seem like a natural thing to do. However, a successful transition is far from guaranteed. There are many critical issues that you need to think through carefully.

First, make sure that your children want to inherit the business. Next, decide what you hope to accomplish by passing on the business. Then, turn your attention to the future success of the business.

The Future of the Business

It's a harsh world out there. Markets grow and change. Competitors come and go. The speed of change is faster than ever.

Family businesses have the benefit of being small and independent, which means they can be quick to respond and adapt. The owners can overcome bureaucratic red tape.

The questions to consider are how well the business is competing today and whether there is anything on the horizon that threatens its survival.

Also think about new business practices, including the use of technology, that you can employ to stay in a strong competitive position.

The Who of Succession

Successfully passing your business on to your children requires that those children want to inherit the business. Desire is not enough. They must also be capable of assuming the leadership.

You need to plan to prepare and develop your children. That plan must build all the skills required to manage the business.

Finally, you must consider the timing of succession. Will your children's leadership abilities be developed enough for them to take over when you are ready to retire?

Who's in Charge?

How will decisions be made in the future? The new leaders need to have the authority to make tough decisions — and then be accountable for their actions.

If the business is large enough and several family members are involved, there should be a system for resolving conflict.

The alternative is anarchy — or war. Everyone goes his or her own way. Conflicts become ongoing arguments.

An inability to resolve conflicts will doom the business to failure and the family to dysfunctional relationships.

Keeping the Family Harmonious

Having systems in place to resolve conflict is only a start. You also should be certain, up front, that all family members are moving toward the same goals and objectives.

Obviously, there will always be some conflicts between family members. It's human nature. Every family has its problems. There are no perfect children, and there are no perfect parents. In the healthiest families, members simply try to do their best and hope for understanding and forgiveness when they make mistakes.

Agreeing on values, purposes and goals will go a long way toward reducing potential points of conflict.

Money, Money, Money

The Bible says that money is not evil; it's the love of money that is the problem. Money-related issues can easily become the focal point of many succession concerns.

What will the parents get? How much will the children be paid? Is there enough money to pass along the business after paying the taxes? How much cash does the business need to succeed and grow?

You should anticipate and address all these money issues. Having an upfront agreement is very important.

It Takes Work

Succession planning isn't easy. There are many issues at which you need to look. Planning and training take time, and each step is an important part of the process.