If your Middle Market organization is family-run, succession planning may have a different meaning to you. Your situation is certainly different from your corporate counterparts. So, if you’re hoping to keep your company within the family, you’ll need to have a solid succession plan in place.
When you look at wanting your successor to come from your family, there are a number of things you’ll need to keep in mind.
Family Dynamics
More than one company has failed during succession because of the dynamics of the family involved.
If communication and decision-making within your Middle Market company are an issue on a daily basis, they’ll be an issue as you look to have someone succeed you. You’ll need to sort out your issues if you want the company to move forward successfully. This may mean anything from bringing in a few outside advisors to going to family counseling and communication sessions all the way to rethinking your succession plan or successor. Fix your dynamics and communication before you try to move ahead.
Don’t Think Succession Planning Is Optional
If you want your Middle Market organization to stay in your family, you can’t just assume the next generation both wants the responsibility and has the know-how, experience and abilities to take over. Just because you share DNA doesn’t mean they’ll be successful and it doesn’t mean they have what it will take.
Make sure you have frank discussions with your potential successors and that you set them up on the right foot. Get them involved early in the planning process and make sure you take their input to heart. Again, you might want a board of advisors or people from outside your family helping to document and advise you through this process.
Start Early
If you want to retire in 5-10 years, you should already have a successor in mind and they should be in the process now. Does that seem like a long time? Well, you’re asking them to know all the nuances of your company, understand the day-to-day needs, know your finances, be good at finding, hiring and retaining key players, understand the sales, business, development and production cycles, be good at communicating with employees, vendors, customers, and the public, stay competitive in your market and be able to drive your success moving forward.
Seem like a lot? It is and many of these tasks require subtlety, communication skills, diplomacy and other abilities that take time to learn and develop. Don’t rush the process if you want your successor to be successful and happy to stay onboard.
Don’t Stop At Tomorrow
Succession planning is a long-game – don’t think just about who takes over from you. About 30% of organizations are able to transition to a second generation successfully and less than 15% make it with a third – and only 3% make it to the fourth generation! If you are only thinking about your successor and not the long-term strategy of your Middle Market organization, you aren’t helping your odds.
While you don’t want to set forward stringent rules that ensure failure, you will want to spend some time thinking about what you want to see for the third, fourth and fifth generations. It may be hard to imagine your company continuing that long, but you started it with a lofty vision in mind. Again, work with some advisors to help you figure out how you can best shape the future from today.
Succession planning is a key ingredient to your family-run Middle Market organization succeeding in the near and far future. Make sure you tackle it early and head-on.
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