BUSINESS
SUCCESSION: TEN TIPS TO MANAGING SUCCESSION PLANNING
BY MARC FARMER, PARTNER AT WILKINS KENNEDY MAIDSTONE
FEWER THAN 24 % OF FAMILY BUSINESSES MAKE IT THROUGH TO THE SECOND GENERATION, BUT WITH 49 % OF SMES HAVING NO SUCCESSION PLAN, PERHAPS MORE WOULD SURVIVE WITH A SOLID STRATEGY IN PLACE. HERE’ S OUR TOP TIPS FOR AN EFFICIENT SUCCESSION PLAN.
S – STRUCTURE
This defines boundaries between family and business and a key structure ensures every individual gains a clear understanding of their roles and responsibilities – as family member, shareholder, employee or all three. Handing over your business to another member of the family can be an exciting time, but it can also be fraught with additional pressure whilst succession is in the air. If the structure of the family and business are carefully planned, then difficult personalities and business issues can be considered and handled more effectively.
U – UNITY
Family values are key to securing one unit – not just in business, but in the home too. These manifest themselves in several common values, which together make up how a job is really done and how the family run their lives. Even though these values may be passed down subconsciously, common goals also need to be verbalised so that everyone can express a desire for different ways to work together going forward.
C – COMMUNICATE
Keep all communication channels open, particularly for sensitive or difficult issues – as everything needs to be addressed. Creating an open and safe environment is essential to allow real issues to be tackled.
C – CHANGE
There is a common phrase“ but that is how we’ ve always done things”. Whilst there are benefits to historic knowledge and experience, in today’ s dynamic and rapidly advancing environment, change is essential. Planning for a smooth transition to incorporate these differences is key to ensuring a good balance is found. Transparency and open communication will help to achieve this.
E – EDUCATE
Developing on existing knowledge and harnessing the skills of future generations can be quite complicated – especially when the business they are entering is much bigger or much more sophisticated than the generation before them. Responsible ownership and stewardship can only be achieved with a full understanding of the roles and responsibilities that come with a shareholding – and this can only be achieved by education.
S – SHARES
For parents handing a business over to their children, a number of difficult questions can arise. How do you treat your children fairly? Should they have equal shares, or, only give shares to those continuing to work in the company? Should shares be placed in trust? There is no simple answer and certainly no one-size-fits-all solution – it will require careful planning and structuring. There could be complex legal and tax implications too and these will also need to be considered.
S – STEWARDSHIP
Only 13 % of family businesses make it past the third generation – but with a bit of careful planning, this number could be increased. Long term visions should be discussed and articulated clearly so that everyone understands their individual responsibilities.
I – INCENTIVISE
Actions speak louder than words and loyalty should be rewarded in order to maintain longterm success of the family firm. Whether these incentives are basic salaries, equity or even ownership, these should be at market rate and fairly rewarded in exchange for good work done. That way, there is no confusion between the rewards family members enjoy by virtue of their ownership and the salary they earn for the work they do.
O – OUTSIDERS
Whilst family should be at the centre of any succession plan, taking advice from an outsider can also play a pivotal role. They bring objectivity and can bridge any gaps between the generations. They can also act as“ caretaker” if any younger generations are not ready to take over the reins. However, this outsider must be neutral and play a meaningful role in the succession process.
N – NEXT STEPS
There is a lot to consider in any family succession process, but if you are thinking about next steps, Wilkins Kennedy can help with a well-structured, systematic approach to achieve a smooth process.
If you would like some advice about succession planning for your business, then contact your local Wilkins Kennedy office in Ashford, Canterbury, Maidstone, Orpington and Sandwich to see how we can help.
Local offices:
Ashford: 01233 629 255 / Canterbury: 01227 454 861 Maidstone: 01622 690 666 / Orpington: 01689 827 505 Sandwich: 01304 249 997
www. wilkinskennedy. com
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