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4 Essential Succession Planning Tips for Family Owned Businesses

by Steve Yakesh

Succession planning takes a lot of thought and time if done right.  Inside a Family Owned Business, it can be even more of a challenge.

With 63% of family owned businesses being run by baby boomers, the need to have a game plan for leadership transition is very real.  Some are lucky enough to have the next generation ready to take over the family business; however, in most cases, one of two situations arise:

  • The next generation isn’t quite ready to take over, will never be ready or will want to lead the entire organization
  • There are no other family members working in the business

If either of these two scenarios are present, finding the right leader and/or leadership team should be one of your top priorities and it’s not an easy endeavor.

4 Tips for Efficient Succession Planning

  1. Start the Process Early– This will take time to do, but the payoff is enormous.

    • Assess your current leadership team for potential successors.
    • If you have internal candidates, define what gaps they have and create a development plan to get them ready.
  2. Take the Time to DEFINE What is Needed for Success –  Especially, if you need to look outside of your organization.

    • Defining the necessary experience and skill-set is important, but more critical is defining the right personality and motivation to safeguard the current culture and preserve the legacy of your family.
    • Design an executive compensation package that appropriately attracts, retains and motivates desired behavior.
  3. Interviewing and evaluation is key-  Not just for the skills but cultural fit.

    • Plan out who and how you are going to determine the right fit through interviews, assessments, references etc.
    • Some of the best interviewers will be your external advisers who know you and subsequently know what’s important to the family and the business
  4. Long Term Incentive Plans (LTIP)

    • You don’t have to give away what you worked so long to create, but a LTIP will be something you need to attract and retain your future leader that will preserve the family business for future generations.
    • Identify and be aware of what truly motivates your high-potential employees. Unleashing the full potential of your key-employees will ultimately be the key to successfully preserving your legacy.

These four helpful tips can help shift your Family Owned Business focus from planning to development, laying a firm foundation for a strong future.

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