Follow This Foolproof Family Business Succession Planning Checklist


Take advantage of this Family Business Succession Planning Checklist before it’s too late

You’ve spent years, potentially generations building your family business - the last thing you want to see is it fade away.

Yet sometimes the hardest conversations are the ones that surround succession planning.

What happens if you step down from the business? Who’s going to take over? Will it be a family member? Do they know you want them to take over? Have they been properly trained? How do you begin to prepare your business for a succession? What strategies do you need to develop in order to avoid disruption for your employees, suppliers, and customers?

It’s enough to send a person into a tailspin.

And while you may not know exactly when you’re planning to exit (remember, life doesn’t always happen on your schedule), the statistics show that just about half of you are intending to pass on your business in the next five years.

A nationwide survey by the Australian Centre for Family Business at Bond University uncovered some interesting results. More than 40% of family businesses are hoping to transfer either wealth or operations onto others in the next five years. 93% intend to transfer their business wealth within the family, although only 39% have a succession plan in place which identifies an executive successor.

It’s a conversation for another day when you consider, on top of all that, that your championed successor may not even want the throne.

In order to make the best out of those odds, you need to start succession planning, and soon. We’ve compiled a business succession planning checklist to help you get through the hardest part - getting started.

Access our complimentary Family Business Succession Checklist

Just click the button and get immediate access to our Family Business Succession Planning Checklist.

The 8 Principles for Business Succession Planning

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CEO of Exit Advisory Group, Simon Bedard reviews the 8 key principles for family business succession planning

1: Set Company Goals

If you’re gearing up to pass the torch, the first step is to pause. 

Take a few moments to set some realistic, long term goals for your company. It’s important in any transition period that a business stays focused on the overall objectives. This will help the business be more successful, but it also helps people rally around a cause, which will promote greater collaboration.

2: Get Clear on Your Personal Objectives

Now it’s time to get clear on your personal objectives and get feedback from other key stakeholders. Different perspectives can be very useful when looking at the future of the business. This includes other shareholders, family members, and potentially some of your employees. Consider whether you want to keep the business in the family or stay involved after passing on the baton. What kind of legacy are you looking to leave behind?

These personal factors may have a bearing on your business decisions as you lead up to your eventual exit.

3: Figure Out What Your Business Needs

Great, you’ve got a roadmap. Now you need someone who can make sure the company stays on track. While it’s common (and unfortunate), some business owners choose their eldest child or someone they are quite fond of over another candidate who may have more business sense. Yes, it can be difficult, but it’s important to put head before heart in these situations.

Before you dive into your family tree, trying to pinpoint who you think will be best to take over, here’s a handy tip. Draw up a list of skills and key competencies you know to be necessary for your role. Whether it’s an eye for innovation, ability to manage a team, or a cool head in sales and negotiations - or all of the above!  Ask key stakeholders internally and externally for input on this too. This checklist can be used to screen potential successors.

Remember, a succession plan should incorporate the core values of your business as well as your personal objectives. This plan should include the following core elements:

  • Identify not only your successor, but how much of a stake they will acquire and at what cost
  • Have a shareholder agreement in place
  • Include an estate plan
  • Include a timeline for the transition
  • Include an updated business valuation

In more detail, this plan should identify any foreseen business risks, layout common goals, and address any financial, tax or loan requirements for the transition of power. Throughout the process, you may have to revisit your plan and update it to reflect any changes in either your business value, fluctuating market conditions, your own health and wellbeing, as well as of your successor. Done regularly, with all parties involved, this works to keep everyone on the same page.

What are the steps that should be taken in carrying out a succession plan?

4: Choose Your Successor

No doubt, this can be a tough call, especially in a family business. If you’re choosing just one family member, it may cause conflict if others may have been interested in taking over. If you choose to appoint two successors, you may be placating familial ties, but you could be leaving your business without a clear leader going forward.

At this stage, many business owners choose to bring in
outside advisers to help assess business needs and provide an unbiased perspective. An expert will be able to deliver leadership appraisals, top to bottom feedback on processes, as well as an evaluation of each of your potential successors - without the political strings attached.

It’s worth noting that multigenerational family businesses often succeed
when the decision comes from the child, rather than the parent. If your plan is to have your children take over, it is so important that you talk to them about it honestly and openly years before you plan to exit. If you believe them to be capable, and you believe your vision for the future aligns with theirs, then it’s time to identify your successor.

5: Train Your Successor

The transfer of knowledge is integral to any successful succession plan. So, once you’ve identified who will be taking your place, make sure you leave adequate time to train them. There’s nothing worse for both your business and your successor’s mental health, to be forced into a role before they’re ready.

Remember, succession planning is not a one-off incident. It’s a systemic transitional strategy meant to be started years before you plan to exit.

Providing appropriate counsel and direction is essential. Conduct regular appraisals of their work, give guided performance feedback and promote growth by empowering them with more responsibility and larger projects. This ensures you’re best preparing them for the challenges that lay ahead as CEO. Sometimes this training is done in your business, but much of the time, it is valuable for successors to gain these skills and education working outside of the business first, and bringing their perspective in. 

6: Focus on the Transition Process of the Succession Plan

As part of the process, your successor will progressively get more involved in decision making and overseeing different areas of the business so they can be caught up to speed by the time you’re ready to fully hand over the reins.

Even if you plan to stay on as Chairperson, there needs to be a timeframe to hand over the day-to-day management of the company. You should also use this time to review your shareholders agreements, estate planning, tax situation, and your personal exit readiness. Of course, this can all be run in parallel to the operational handover.

Steps to business succession planning - Exit Advisory Group

7: Trust Your Judgement

If you don’t actively show faith in your proposed successor, and demonstrate to other family members, your management team, shareholders, and employees that you trust your candidate to do the best job possible, then your business is not likely to succeed in their hands. If you outwardly show excitement, trust, and confidence to all parties, your successor is likely to feel empowered and capable to tackle the job ahead.

8: Keep an Open mind

If you find yourself in a situation where your successor no longer wants to take over, or you discover that they don’t have the right skills, temperament or motivation to run with the baton, then you will need to prepared to run the process again. It’s possible you’ll be looking outside the family for qualified candidates. But with an open mind, a good process to follow and solid communication, you are less likely to have these issues.

Consider External Options

If there’s no one in your immediate or extended family who either wants or is able to take over the business, looking externally is another option for you. There’s no point in appointing a family member who is uninterested in running the business just to keep it in the family. 

If you’re looking externally, the same steps above apply. Look for candidates that have strong talents in areas you’ve identified, and that are enthusiastic towards the work. If you decide to sell to an outsider, you may be able to build into your negotiations staying on as a consultant or board member in some capacity, if that type of exit is what you want. 

Preparing your business for succession doesn’t have to be an overwhelming experience. We’ve also prepared a more detailed family business succession planning checklist, access it here. 

With the right guidance, and enough time to properly prepare and train, your succession roadmap will ensure your business stays on the path to success.

Access our complimentary Family Business Succession Checklist

Just click the button and get immediate access to our Family Business Succession Planning Checklist.

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