Owners need to understand that conducting a family succession requires a very different path than an owner who is looking to sell to an outside party. Most family successions involve some form of gifting in order to begin transferring family wealth. It’s a different mindset than trying to get maximum value for the company.
Here are a few key issues that impact successions:
- Family members may not be capable of taking the company over. This is probably the number one failure point because hope overshadows reality for many owners.
- Family might be very capable, but not interested enough in the business to want to own it.
- Financial terms are not discussed and financials are not shared with family early enough in the process of their development.
- The senior family members who are planning to exit have not clearly defined their timelines and are deferring transferring responsibility and relationships to the incoming succession team.
Another option to create a successful succession is to consider bringing in an outside CEO. The CEO can be an interim person to train family or to be a permanent part of the company. Sometimes it is difficult to separate family emotions in a succession, which can hinder the training and growth of the younger family members. Please contact us for more information.