If you have a small family business, you need a business succession plan. You might assume that you don’t because it’s all in the family. However, this can be even more reason to get the plan in place.
Family conflicts, including those that run under the surface, can be heightened during times of upheaval. It is best to get your documents in order and make everything official long before it is necessary to do so.
How To Create A Business Succession Plan For Your Family Business
1. Understanding Filial Responsibility
When it comes to anything involving estate planning and family finances, you should find out whether your state has filial responsibility laws and whether you or your children would be affected by them.
These laws can require an adult child to be responsible for their parents’ medical or other bills, particularly if the parents are struggling financially. This can have serious implications for long-term financial planning, but there may be steps you can take to protect assets.
You might want to talk to an attorney, a financial professional or both to better understand what obligations may exist, if they will affect your family and how best to manage them.
2. Lay the Groundwork Early
While emergencies can occur that require a family succession plan to be triggered far sooner than anyone planned, ideally, you will have years to lay the groundwork. This means not just preparing other family members but preparing employees as well.
Employees who know from the start of their time with a company that the plan is to pass the business on to other family members will stick around if they are comfortable with this. Those who are likely to be unhappy with such an arrangement have ample time to move on.
This also gives everyone plenty of time to prepare for the eventual handover. This is one of the reasons every small business needs automation, as well. Having processes automated means in the event of an emergency within the family structure, business can go on as usual and institutional knowledge is not solely held by individuals.
3. Keep Your Standards Up
There is often a perception that family members will not be held to the same standards as other employees. For this reason, as a way to prevent nepotism, it is important to make sure that whoever you choose as your successor is exemplary.
Having both a relevant academic background as well as at least some familiarity with all aspects of the business is important. When you choose your successor, you should think in terms of what is best for the business, including employees, vendors and customers.
4. Involve Non-Family Employees
While you may not be handing the ownership of the business over to people who are not family members, involving your most capable and valued employees is critical to the success of any plan.
In fact, you may want to get some feedback from them about who you will choose to follow you. In addition, they can be invaluable in training and preparing your successor to follow you.
5. Communicate Your Vision
Does your company have a mission statement? What are the core values that you want carried on after you step aside?
Whether you are a small town mom-and-pop hardware store dedicated to serving the community or a big-city firm with global reach, answering these questions will help you better prepare the family member who comes after you to carry on your ideas.
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