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Succession in your family business… When is the right time to start?

PUBLISHED: 10:39 17 February 2016 | UPDATED: 09:10 02 March 2016

Debbie Austin, Partner at Wellers

Debbie Austin, Partner at Wellers

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Debbie Austin, Partner at Wellers in Oxford explains, that when planned for as a process, a succession can satisfy the needs of the business with the competing interests of family members.

Entrepreneurial family businesses are some of the UK’s most successful contributing a quarter of British GDP and employing 9m people. Unfortunately barely one in three make it to the second generation and just 15% survive to the third. The best transitions happen when seniors and the next generation work together to build a methodical approach that overcomes the forces that favour doing nothing. Succession planning is built up as the main challenge facing family firms. In reality it’s more of a personal matter, individuals recognising when the time is right to hand over and successors seeking the affirmation and belief in their own ability to step up.

 

In life there is an inevitability that the time will come for one generation to step down and the next to take over. Easier said than done, unless everyone buys into the process. Families that succeed in business for generations recognise the need to be open, frank and deal with the matter at hand. In other words, this pivotal moment for any family, and consequently the business, can be an opportunity for both generations.

 

Time to let go

 

As the current owner you have the opportunity to consider how you want to spend your ‘golden years’ and the role, if any, you want to have in the business going forward. Most owners will want to keep the business going within their family, especially where the organisation is the key contributor to the family’s wealth. That means ceding control at some stage. It’s a hard concept to grasp but the whole process is reliant on recognising this and putting the necessary preparation in place to be comfortable walking away from the business.

 

Choosing from the next generation

 

The upcoming generation have an opportunity to embark on the next stage in their journey, within or outside the business. If outside, they may retain a vested interest by way of share ownership. In either scenario, they can continue the family traditions and move the business forward, by developing new skills to become the leader of the family firm, or further enhancing their knowledge to become responsible business owners. Like any job, family members should only be considered for taking over based on their merits. You may have more than one family member as an option. That’s a good problem.

 

Preparing the next generation

 

From an early stage find ways to involve children in the business and discussions about it. Gradually present it as a career option as opposed to a family obligation. Present the business in a balanced manner detailing the privileges, responsibilities and commitment required. Should they choose another career option, that’s far from the end, support it. Many children pursue alternative careers only to return to the family fold later. It can be very beneficial as success in another area can build esteem and credibility.

 

Leadership development

 

If your successor agrees to join then you should develop a career plan to develop their skill set around the needs of the business. As mentors, non-family directors can play important roles in the succession process. Establish a clearly defined role and set objectives with timelines to achieve them. Create a plan to transfer assets and control to your successor in a gradual manner that doesn’t hurt staff morale, ensures the smooth day-to-day running of the business while also protecting other family

members’ interests. Succession is not simply a question of handing over a tried and tested way of running the business from one generation to the next. It’s a system change – a transition to a different business structure with a distinctive culture, new procedures and evolving ground rules. Wellers advise many family owned firms and have an in depth understanding of the relationship challenges being in business with family members can bring. By listening, demonstrating empathy with all parties and understanding the financial needs of the family and business, we deliver advice to help clients fulfil their aspirations

 

For further information contact Debbie Austin

 

Tel: 01865 723 131

 

www.wellersaccountants.co.uk

 

 

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