Planning for the future of a family company is often more complicated than other companies which simply need to appoint a new CEO with the proper credentials. Therefore, extra care should be taken for the planning of succession, something which can sometimes take several years. Having an effective board in place will ensure the best succession path for the individual business and its owners is chosen, and a realistic timeframe established within which to make it happen.
Succession planning is a complex and often emotionally fraught business. But the benefits include:
Companies with boards are more credible to buyers
Deciding to sell or transfer ownership of your business is not the same as actually doing it. Some of the tough elements involved are: •owners often have an unrealistic value of their company
Fewer than 15% of family firms survive under family control after the third generation.
The reality is that many small business owners simply shut up shop when they're ready to retire or sell. Of the above survey group, only 47% had any sort of exit plan and few of these were formal ones. Most owners said they didn't have a plan because:
Some of the reluctance to discuss or plan is psychological. It takes root in:
All these elements make it difficult to sit down and start building your own succession plan.
Establishing a board or including independent directors in your governance structure will bring much needed objectivity to the discussion and planning. A board will help you to:
Also see setting up a board