When you first started out as a mompreneur, perhaps the thought of passing your business down to your children was the farthest thing from your mind. But years down the line, your work-at-home job or startup may have grown to become an established business, providing not just income for your family alone, but livelihood opportunities for your most trusted employees and business partners.
The family business you started may have become an important part of the community—so much so that when the time comes, your decisions during your succession planning will have far-reaching implications.
Even for families that are close-knit, succession planning will never be an easy task for a family business. There are many factors to consider in deciding who can best lead your company into the future. For a lot of mompreneurs, it’s a complicated process that spans years.
There are also some cases in which even careful planning leads to disasters. According to Score, a business mentorship organization, only 30 percent of family-owned businesses ever make it through to the second generation, and only 12 percent survive the transition to the third. With the odds against a successful handover, it’s even more critical for you to be thoughtful about planning your business succession.
To leave your business in the right hands, you need to be strategic about your succession planning. Here’s the mompreneur’s guide to succession planning to help you navigate this complex task.
Some Benefits of Succession Planning
It could be an option to not take part in succession planning and to make other plans for your business, such as liquidating it or selling it off. But here are the arguments for overseeing succession planning for your family business’s next generation of entrepreneurs:
1) Business Continuity
While precious few family businesses can survive transitions, it’s not impossible to preserve your legacy for generations to come, and in your case, it may be the best thing to do for you to try. It depends on whether you have a robust and executable succession plan. Your plan can guide the different generations of your family through an otherwise difficult transition and leave all stakeholders the better for it.
Your children have likely grown up seeing you run your business. They may share similar interests, passions and talents with you that would enable them to carry this business forward. As a mompreneur, you may be able to provide your kids with their first job opportunities. All of these are reasons to consider planning for one (or more) of your children to take over your business when you are unable to continue running it.
2) Talent Development
Succession planning is not just about filling leadership positions, but about nurturing potential. For SMEs based in the Philippines, for example, succession planning will involve learning the nitty-gritty of everyday operations and getting successors to be proficient at tasks like SME business banking.
If a successor can be trusted to manage the family company’s online business banking, you can expect their business management talents to blossom and, in turn, be passed down to succeeding generations. Involve your children in the ins and outs of business banking and other key areas of family business management, and you’ll be able to nurture talent that will serve the company for years or decades.
As a mom, you know your children better than anyone else. You can see which talents they have that would be an asset to your business and help them develop those talents or pursue their interests to be able to contribute to your business. This can be a win-win situation in which your children benefit from the business and the business benefits from your children.
3) Risk Mitigation
Succession planning in a family business can also mitigate risks and disruptions by providing a structured process to identify and groom potential leaders. This will reduce the impact of sudden leadership changes and ensure that the right people are helming the business in the toughest of times.
4) Employee Engagement
Engaged employees are the heartbeat of a thriving family business. Succession planning sends a powerful message to the workforce—that there are opportunities for growth within the organization, and the founding family is doing everything to broaden them. Since a structured succession plan usually relies on meritocracy rather than nepotism, eligible employees will be empowered to do their best to deserve a spot on the leadership team.
5) Cost Savings
While investing in succession planning might seem like an additional cost, it is, in fact, a strategic investment that pays off in the long run. External hires for leadership roles can be expensive and may require a significant adjustment period. Invest in homegrown talents who already know the culture of your family business, and you’ll be able to save a lot of money when pursuing its most important growth opportunities.
How Can You Create a Plan for Succession?
When it comes to succession planning for your family business, you have to balance out a lot of factors, including family dynamics and genuine concern for the business at stake. While there’s no one-size-fits-all solution as each business and each family is different, here are some general guidelines for rolling out your succession planning:
1) Start Your Succession Planning Early
The key to the most stress-free succession planning process is to start early. Procrastination in this area can lead to a host of problems, from uncertainty among stakeholders to potential disruptions in business operations in the near future. Don’t delay this process until you and your potential successors are older; start the trappings of your plan now.
2) Identify Key Positions
Not all roles are created equal, and some are more critical to business continuity than others. That’s why it’s important to identify key positions that hold up the business’s foundation and to think about who among your children, grandchildren, nieces, nephews, or other family business stakeholders could fill them based on their track record and willingness to lead.
3) Assess Talents
Objective talent assessment is crucial when it comes to balancing your family ties with your business requirements. While it can be tempting to simply leave your business to your heirs, such as your children or grandchildren, you first have to consider if they’re even interested in your business and have the talents and skills to take over the business.
Your business’ next leaders should genuinely hold your business’ interest at heart. Furthermore, they have to have the experience and skills to manage the company. These factors should be considered when it comes to drawing up and finalizing your succession plan.
4) Engage Key Stakeholders
Remember, too, that succession planning isn’t a solo endeavor. It requires the active involvement of family members, current leaders, and other relevant parties. In hearing their perspective, you’ll be able to get a broader view of the task ahead. As a major stakeholder yourself, you should also strike a balance between exerting control and collaborating with other stakeholders who may have opinions that are different from yours.
5) Develop Succession Criteria
One important way to move your succession planning forward is to determine key criteria for filling important leadership positions. Some examples of questions that may be relevant are:
- What are the leadership traits successors should have?
- What are the skills and experience required of successors at minimum?
- What are the long-term goals of your successors?
6) Provide Sufficient Training and Development
Any investment into the training and development of your potential successors is an investment in the future of the business. Consider enrolling them in a mentoring program that provides comprehensive training in leadership development and that can upskill them in areas like financial management or human resource management.
7) Establish a Transition Timeline
Smooth transitions require careful planning and a realistic timeline. It would be prudent for you to map out your succession plan so that you have a blueprint for different tasks and decisions that have to be made. In case anything unexpected happens, your business team will have a comprehensive guide and a solid idea of where the business is headed.
More than just a business strategy, succession planning is a testament to your commitment towards preserving both your family legacy and your business success. Take care to balance your family and business interests through careful planning, and you’ll be able to see your family company through its generational transitions and the prosperous future ahead.
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