BUSINESS
SUCCESSION : TEN TIPS TO MANAGING SUCCESSION PLANNING
BY MARC FARMER , PARTNER AT WILKINS KENNEDY MAIDSTONE
FEWER THAN 24 % OF FAMILY BUSINESSES MAKE IT THROUGH TO THE SECOND GENERATION , BUT WITH 49 % OF SMES HAVING NO SUCCESSION PLAN , PERHAPS MORE WOULD SURVIVE WITH A SOLID STRATEGY IN PLACE . HERE ’ S OUR TOP TIPS FOR AN EFFICIENT SUCCESSION PLAN .
S – STRUCTURE
This defines boundaries between family and business and a key structure ensures every individual gains a clear understanding of their roles and responsibilities – as family member , shareholder , employee or all three . Handing over your business to another member of the family can be an exciting time , but it can also be fraught with additional pressure whilst succession is in the air . If the structure of the family and business are carefully planned , then difficult personalities and business issues can be considered and handled more effectively .
U – UNITY
Family values are key to securing one unit – not just in business , but in the home too . These manifest themselves in several common values , which together make up how a job is really done and how the family run their lives . Even though these values may be passed down subconsciously , common goals also need to be verbalised so that everyone can express a desire for different ways to work together going forward .
C – COMMUNICATE
Keep all communication channels open , particularly for sensitive or difficult issues – as everything needs to be addressed . Creating an open and safe environment is essential to allow real issues to be tackled .
C – CHANGE
There is a common phrase “ but that is how we ’ ve always done things ”. Whilst there are benefits to historic knowledge and experience , in today ’ s dynamic and rapidly advancing environment , change is essential . Planning for a smooth transition to incorporate these differences is key to ensuring a good balance is found . Transparency and open communication will help to achieve this .
E – EDUCATE
Developing on existing knowledge and harnessing the skills of future generations can be quite complicated – especially when the business they are entering is much bigger or much more sophisticated than the generation before them . Responsible ownership and stewardship can only be achieved with a full understanding of the roles and responsibilities that come with a shareholding – and this can only be achieved by education .
S – SHARES
For parents handing a business over to their children , a number of difficult questions can arise . How do you treat your children fairly ? Should they have equal shares , or , only give shares to those continuing to work in the company ? Should shares be placed in trust ? There is no simple answer and certainly no one-size-fits-all solution – it will require careful planning and structuring . There could be complex legal and tax implications too and these will also need to be considered .
S – STEWARDSHIP
Only 13 % of family businesses make it past the third generation – but with a bit of careful planning , this number could be increased . Long term visions should be discussed and articulated clearly so that everyone understands their individual responsibilities .
I – INCENTIVISE
Actions speak louder than words and loyalty should be rewarded in order to maintain longterm success of the family firm . Whether these incentives are basic salaries , equity or even ownership , these should be at market rate and fairly rewarded in exchange for good work done . That way , there is no confusion between the rewards family members enjoy by virtue of their ownership and the salary they earn for the work they do .
O – OUTSIDERS
Whilst family should be at the centre of any succession plan , taking advice from an outsider can also play a pivotal role . They bring objectivity and can bridge any gaps between the generations . They can also act as “ caretaker ” if any younger generations are not ready to take over the reins . However , this outsider must be neutral and play a meaningful role in the succession process .
N – NEXT STEPS
There is a lot to consider in any family succession process , but if you are thinking about next steps , Wilkins Kennedy can help with a well-structured , systematic approach to achieve a smooth process .
If you would like some advice about succession planning for your business , then contact your local Wilkins Kennedy office in Ashford , Canterbury , Maidstone , Orpington and Sandwich to see how we can help .
Local offices :
Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
www . wilkinskennedy . com
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