Though he was past traditional retirement age, he was living every businessperson’s dream.
A healthy company. A strong management team. The freedom to come and go.
“Maybe it’s time,” he told me. “Time to pass on my business to my adult children—even though they’re not actually in the business. I’m thinking that if they’d just let the team I’ve put in place run things, it would be a smooth transition. What do you think?”
“Let’s play it out,” I responded. “Let’s say you walk away. You move to a secluded island. Or you get an RV and start traveling nonstop. You’re not just gone. You’re gone gone!
“For the first couple months, nothing changes in the business. But then two members of the management team have a disagreement. It’s not a big deal. In the past something like this would have ended up in your office. You’d have handled it quickly, and in 24 hours nobody would remember it.
But with you gone, and less experienced hands at the wheel, a brokered resolution never emerges.
“As time passes, the disagreement festers into a bitter conflict. Words get exchanged. Motives get maligned. Slowly, factions form, and a key leader quits in frustration.
“Now your ‘strong management team’ is weak. And workplace morale is in the toilet.
“And it isn’t just morale. What about money? Right now, when your team members make financial decisions, your presence provides a healthy sense of accountability.
“Who’ll be monitoring all those expenditures when you’re off swimming with the manatees in Florida?”
My friend’s eyes widened. He was crashing into a truth every business owner needs to consider: Your presence means more than you realize. And your absence leaves a greater void than you think.
(If you REALLY want to grapple with this reality, sometime over the next few weeks watch the holiday classic It’s a Wonderful Life.)
My friend wasn’t on a wrong path. He’d actually cracked the code of success! His business could function without his day-to-day presence. That’s rare and admirable.
But no business can be healthy long-term without strong leadership. Translation: Every family business needs a well-thought-out succession plan.
If you’ve got a family business you want to remain viable, you need that too. Consider four components of a wise succession plan.
1. Family advice. Since you’ve never overseen a big transition like this before, seek outside help. It’s a tricky process. The stakes are too high, and family dynamics are usually too complex to wing it.
Fortunately, there are wise advisors out there who have assisted many family businesses with successions. Interview several. Choose one. (Call or email me if you need a referral to someone.)
2. Family meeting. Maybe like my friend, you have a vague idea that you want to work until you drop, then pass on the business to your heirs.
But do they know that? If not, you need to schedule a family meeting and tell them. Your advisor can help facilitate this critical gathering.
3. Family plan. Family members will surely ask a lot of questions. They’ll likely express concerns, excitement, hesitations, and/or interest. The good news? Out of such communication, you may actually get a rough draft for a successful family business transition!
4. Family partnership, power, and pay. You want your transition plan to involve a gradual ramping up of the partnership, power, and pay of the family members who will one day inherit your business.
Involving them in strategy (the partnership part), allowing them to take part in certain decisions (the power part) and remunerating them for their efforts (the pay part) will engage them even as they get up to speed about the business.
My friend aced the class on how to start and grow a profitable business. If you’ve accomplished a similar feat, give yourself an “A.”
But just like my friend—and every business owner—there’s still a final final.
The test? “Securing a successful succession.”That’s one exam you don’t want to flunk!
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