
Top 10 succession planning tips for family businesses
Only 30% of family-owned companies successfully transition from the first to second generation. But is that down to luck? Or is it the result of effective succession planning?
It’s widely believed that family businesses often falter due to poor communication, which can lead to disharmony and a lack of consensus about the business’s direction. These challenges become even more pronounced when succession planning enters the picture.
Why succession planning should start early
Imagine a multi-generation family business owner coming home from work to find his children, aged 15 and 13, arguing. When asked what the disagreement is about, they reveal they are debating who will be the next managing director of the family business. Despite their young age, it highlights how deeply embedded family businesses can be in the lives of all family members – whether they work in the business or not.
The transition from one generation to the next is rarely straightforward. It can spark conflict and, in some cases, lead to the business’s downfall. As I often advise clients, “it is important to deal with succession early, in an open and inclusive manner.” Succession planning should be a long-term process, ideally beginning well before the current generation plans to step down.
Moving a business from one generation to the next can be a painful and emotional journey. If dealt with well it can avoid a lot of conflict that can arise when the current owner hangs on as others try to takeover. This dynamic can leave the next generation feeling overshadowed and frustrated, potentially causing resentment and tension within the family. Part of the succession plan will be to ensure that a successor has the necessary skills when the transition in the business inevitably happens.
Succession planning can be a frustrating and emotional journey. But with thoughtful preparation and a clear understanding of the skills required by the next generation, a successful transition is achievable. By setting clear boundaries, fostering fairness, and planning for the future, you can ensure your business not only survives but thrives for generations to come.
10 tips for a successful family business succession plan
Whether you’re a multi-generation owner, or just starting out, these 10 tips will help you build a resilient, thriving family business and prepare it for future success.
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Prioritise the business to protect the family
It may seem counterintuitive, but the best way to support your family is to ensure the business is strong and sustainable. When decisions are made with the business’s long-term health in mind, the family benefits too.
Ask yourself: “Are you emotionally ready to relinquish control of the business you’ve spent your life building?” Letting go requires confidence that the business will continue to thrive – so prioritising its health is essential.
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Set boundaries between work and home
Mixing business with personal life can lead to tension and burnout. Avoid turning every family meal into a boardroom discussion. Instead, establish clear boundaries and reserve business conversations for designated times and settings.
Ask yourself: “Do the children genuinely want the role, or do they feel obligated to follow in their parent’s footsteps?” Respecting personal space helps clarify true intentions.
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Hold weekly agenda-driven meetings
Regular meetings with a clear agenda help keep everyone aligned and focused. These sessions should be strictly business – leave personal matters at the door. Structured communication reduces misunderstandings and improves decision-making.
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Avoid “sympathy” roles
Every family member should earn their place in the business. Assigning roles based on obligation, rather than merit, can damage morale and performance.
Ask yourself: “Do the next generation have the skills to run the business?” Ensuring roles are earned, not given, protects both the business and family harmony.
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Embrace the strengths of family ownership
Customers often prefer family-run businesses for their authenticity, trust, and continuity. Use this to your advantage by highlighting your family values, long-term commitment, and personal service in your branding and customer interactions.
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Define clear reporting lines
Family ties can blur the chain of command. To avoid confusion, establish formal reporting structures and ensure everyone – whether family or not – understands who they report to and what’s expected of them.
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Document roles and responsibilities
Treat family members like any other employee when it comes to job descriptions, performance expectations, and accountability. Putting roles in writing helps avoid misunderstandings and ensures clarity across the organisation.
Ask yourself: “How are you choosing which sibling should be managing director?” A formal setting encourages objective discussion over emotional bias.
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Encourage experience outside the family business
Before joining the family firm, younger generations should gain experience elsewhere. This not only builds their confidence and skills but also brings fresh ideas and perspectives back into the business.
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Treat family members fairly, rather than favourably
Family members often have a deep emotional investment in the business, which can be a great asset. However, they should be held to the same standards as non-family employees. Fairness in pay, promotions, and performance reviews is essential to maintaining trust and morale.
Ask yourself: “Is appointing a non-family member to lead the business a realistic option?” A fair and well-run business is more likely to support your retirement goals.
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Seek external advice
Family businesses can become insular. Bringing in outside advisers or facilitators can help resolve conflicts, introduce new strategies, and provide an objective perspective. Don’t be afraid to look beyond the family circle for guidance.
Ask yourself: “Are you financially secure enough to step away without needing to sell your shares?” An external view can help assess leadership potential without bias.
A family business succession plan must strike a careful balance between the needs of the family, the business, and yourself. By reviewing points and questions like these, it is possible to put a clear succession plan in writing. This helps both family members and non-family management understand their roles, the process, and the timeline involved.
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