Great Expectations -- What I Want For My Business
Whatever the desired outcome for your business; reaching it is to have succeeded. Just as the words succeed and succession both originated from the Latin word succedere, they both portray the notion of "turning out well." To be successful in business means to have created something that has worked and can continue. So to ensure that your business will succeed, you want to create a business that can last beyond your leadership.
Prepare for a Journey
It is important to understand that succeeding in business is a journey, not a destination. It is the process of creating a business that can exist without you; building a business that has the ability to transition to the next generation. You need to have an itinerary or map for this journey; a succession plan that determines where you are going and how you will get there.
Generally, the family businesses that succeed do so because they invest the time to create and implement a practical, realistic succession plan for their business and its future, and they make use of the tools at their disposal. We use the term family business to describe the majority of businesses in this country today. There is the traditional model, in which "Dad and Mom" work in the business, progress to the transition phase when one or more of their children join the business, and eventually hand the business over. Then there are the enterprises or closely-held businesses that are partnerships, and the larger public companies that are controlled by family enterprises.
A judicious succession plan is an integrated approach and not just a series of individual tactics that can be deployed. It incorporates the principles that govern the three main areas of a family business: the ownership of the company, the management of the operation and the relationships that make family businesses so unique. Every strategy, tactic, issue or concern affects one or more of these areas. Your 'plan to succeed' needs a structure to identify where the issues fit and how they will be addressed.
Separating the Issues
For example, the management area symbolizes the building and continuation of a competitive and profitable business that will create wealth and equity for the family and the business owners. Planning in this area must focus on dealing with competition and the marketplace. Your business must be able to change with the times and continue to grow. A written business plan is key. Keep in mind that you want to build an organization that represents an investment rather than a lifestyle business. In other words, it must be able to operate successfully and profitably without relying completely on you or any other single individual.
The ownership area deals with the management of wealth within the family business. Wealth and contingency plans must be determined with the objective of ensuring an equitable balance between what is fair to the family members and what is good for the business. While you will certainly need to reinvest wealth into the business from time to time, you want to make certain that it is not done at the expense of the family. The plan should provide wealth for all family members including those who are not involved in the business. It is also important to develop an ownership structure that minimizes taxes, uses the tools available to protect the investment should ownership change, and, last but by no means least, sets aside sufficient wealth for your retirement.
Family businesses are unique in that most business decisions ultimately affect the family members and their relationships. The third area focuses on issues that impact all family members, whether or not they are involved in the business. It specifically defines the context for fair and equal treatment for all. To succeed, a family in business together must have strong communication channels to deal with areas of conflict and emotions. Everyone should be clear on what is important to them and how they are to make decisions as a family. In this area, the objectives are to incorporate the principles and values of the family with the goals for the business, and find a balance between what is right for the business and the personal desires of the people involved.
Beat the Statistics
Statistics show that that 75% of the leadership of family businesses in Canada will change hands within the next 10-15 years. However, only one-third of those are expected to transition to the second generation. For those that do make it that far, the battle is not yet over. A mere 10% are expected to be still in business when the third generation takes the helm.
While the majority of business owners will categorically state that they want their business to succeed and continue after their term of leadership ends, the average family business survives just 24 years. Business owners struggle constantly to separate issues and deal with them effectively. They unwittingly allow the business to drive the family apart, or family conflict to pull down the business! A plan that meets the needs of both the family and the business, and keeps the family connected, lays the ground work for determining what else needs to be done, and what training or education will be required to move the business along.
Embark on the first leg of your journey and invest in an integrated succession plan that will meet your personal objectives and promote long-term survival for your business. Seek the help of an experienced family business facilitator/coach who will work with you to create your itinerary, and then bring together your team of service and product advisors - your accountant, lawyer, investment advisor and insurance broker - to go through the process of implementing the tactics that were identified within the plan.
Grant Robinson is the founding partner of Robinson & Company LLP Chartered Accountants and facilitator for The SuccessCare® Program, a unique program designed to assist business owners and their families in developing an integrated succession plan. For more information on how The SuccessCare® Program can help your family business succeed, please visit our website at www.successcare.com or contact Grant Robinson directly at (519) 780-2011.
By Grant C. Robinson, F.C.A.