Family-run businesses form an essential part of the economy. Tradition, success and history along with their unique dynamic can create a thriving business that many may wish to see continue.

However, as with any business, the conversation about succession and how to continue the business into the future needs to be had.

With only 1 in 4 family-operated businesses considering their approach to succession formally, succession in a family business is one of the greatest viability risks to the actual business and needs to be addressed accordingly.

Every family and family-run business is unique, and every transfer or succession of a family business will also be executed differently. If you are thinking about what your family business’s plan is for succession, you may want to consider keeping these critical factors in mind:

• Where is your business going? What do you want for your family and business? What are your goals and your time frames for achieving those goals?
• Is the vision you have for your business shared by your family? It is important to consider this for the succession of your business, as a mutually shared vision will ensure that the business continues on the projected path even after the business has been passed onto the next generation.
• What obstacles and challenges will your family business face? You need to be able to understand the different perspectives and motivations of each individual that the succession impacts. Ongoing communication is vital to gaining this understanding, but an advisor can be employed to unbiasedly look at the situation independently and take the emotion out of a conversation.
• Create a plan to plot out the path of the business’s future, and the challenges that the business may face along the way as well as what it is currently facing.
• It’s important to remember that a family business does not have to be succeeded by a family (though it’s an outcome you may want). Always consider what the members of your family wish to do, and consider alternatives if none wish to take over the business.

A succession plan for a family business needs to be created to move forward and should detail all of the actions you intend to take (including the steps involved with both management and ownership succession).

It needs to be flexible, adaptable and ready to evolve, as businesses (as well as families), change over time. Your succession planning process should be transparent and understand and align with the goals you have set out for the business’s further development across the generations.

The most effective succession plans:

• Preserve and generate family wealth
• Minimise disharmony and disruption
• Minimise the impact of tax
• Encourage personal growth of family members
• Fund the retirement and family lifestyle
• Bring clarity to where the business and the family are heading.