Friday, March 19, 2021

Advice on Drawing Up a Succession Plan for a Family Business

 


Operating a family business creates unique opportunities to help children get ahead in life once they reach adulthood. With a family business, there will almost always be a job available for close relatives.

However, issues relating to succession planning are not always as simple. Not all children want to enter the family business, much less take over when their parents retire. Those that do may not be suitable for the role or require many years of training and experience before they will be ready.

The current generation may not have concrete plans for how they wish the business to progress once they step down, while the next generation often have their own ideas about where things should be heading. Putting a business succession plan into place at an early stage can help avoid complications down the line.

A succession plan does not have to be a binding document but having strategies in place can help plan for the future of a business. Succession planning for family establishments is one of the preferred areas of practice of Dr Edgar Paltzer, attorney-at-law. Dr Paltzer is based in Switzerland and has been practicing law since 1981.

Family Meetings

The more succession plans are discussed in advance, the better prepared successors are when the time comes to take the reins. Regular family meetings not only help to ensure that everyone has the relevant information and can access any training required; they can also help business-owning families to connect with each other on many levels.

Family meetings can be comprised of multiple facets, some of which are business-oriented and others of which are more about bonding. A committee of family members helps to ensure all voices are heard and all pertinent issues can be addressed at each meeting, leaving all attendees satisfied with the results.

Defining Roles

Throughout the lifecycle of any family business, it is important for everyone involved to have clearly defined roles and responsibilities. By putting these in place during their time at the helm, family business owners can reduce the likelihood of conflict or misunderstandings further down the line.

Each family member should be full appraised of their future prospects regarding the business at the earliest possible stage. Some may be expected to take on prominent leadership roles; others may be future or current board members; others may be shareholders but take a backseat in terms of decision-making.

Developing Key Skills

Education plays a key role in preparing younger family members for the future. Whether children or other younger relatives have a future within the family business or not, most parents will find that providing their children with a solid grounding in how the business operates will prove valuable to those children as they embark on their adult careers.

Parents want their children to be financially secure and prepared for all the responsibilities that come with being an adult. Structuring a comprehensive education plan that accounts for each member of the family from a young age – and ensures everyone understands not only the family business but the business world in general – can be a great first step in protecting a child’s future.

Linking Succession to Strategy

A good succession plan factors in both the strategies of the business and the needs of the family members involved. Different people have different talents and objectives for the future. Tying the company to those relatives whose personal objectives match the strategy of the business going forward has the most chance of success.

 

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