Family succession: questions
Before you start the process of transferring the business, ask yourself some questions.
- Should one of the children take over the business?
- Does the successor I have in mind have the right skills and qualities?
- Would an outsider be better for the company?
Family succession: actions
- Be mindful of emotions and beware of family blindness.
- It is important to consider whether your intended successor has the right skills and qualities.
- Remain open to candidates from outside the family.
A family charter can help you answer these questions and undertake these actions. By laying down clear rules and agreements about how the family wants to deal with the company, you can avoid discussions and arguments at a later date. You could consider laying down compensation for family members working for the company and ways for future generations to enter the company in the charter. The purpose of a family charter is to facilitate effective communication about topics that are equal parts family and business-related. Everyone involved should be allowed to weigh in on the charter, and seeking advice from outsiders is generally a good idea. A family charter consists of the following:
- vision on the future and objectives of the family business
- values and rules of conduct of the family and of the family business
- agreements on ownership and control
- careers in the family business
- governance structure and the consequences when family members leave the company
- salaries and compensation for family members
- management of the family business by family and/or non-family members
- process of transfer and succession in terms of leadership and ownership
- consultation, information and decision-making within the family
When transferring a business within the family, you can opt for a phased transition in the period before the transfer. With this approach, you gradually transfer more and more responsibilities to the successor so that everyone can prepare for their future duties. It is important that the successor draws up a clear business plan with their view of the company's strategy and future, which should also be attached to any application for funding.
How to sell your business in 6 steps
For more information on what goes into selling a business, read Selling your business in 6 steps.