Let’s face it, it takes a lot of hard work and dedication to build a successful business. Yet, the average family business has a lifespan of just less than 25 years. Most family-owned businesses fail after their founders’ death due to the lack of a formal succession plan.
Succession planning can be just as difficult as building the business. However, a properly drafted succession plan can help ensure a smooth transition. And as with any plan, knowing common mistakes people make when creating succession plans can prove extremely useful.
Here are common mistakes that you need to avoid while working out your business’ succession plan:
Delaying the succession plan
Most business owners tend to be reluctant on the issue of succession planning until it is too late. Waiting until the business owner is on the verge of retiring, suffers a significant health crisis or dies can put undue pressure on the succession process for the owner’s heirs. It is advisable to have a succession plan in place and then make reviews and adjustments as necessary — rather than waiting to put one together at the eleventh hour.
Leaving too early — or hanging around too long
This is usually one of the most challenging issues to address as it can be very subjective. You have probably heard stories of company founders who stubbornly refuse to let go of power even when their interest, skills and strength may have waned. This can stifle the business’ growth and effectiveness. A less frequent – but equally damaging – problem is when the owner walks away from the business too soon before the next generation is fully prepared to take on decision-making roles. Simply put, the timing of the transfer of power is very critical.
The process of handing over business control from one generation to the next can be daunting, contentious and frustrating. However, it can also be an incredibly enriching experience that bonds the team in new ways. All a business need is a comprehensive succession plan that is devoid of these mistakes.