Many businesses begin with a dream that flourishes into a successful family business. But only 12% of family businesses transition to a 3rd generation. How do you ensure your business survives and thrives for future generations? Read more below!
Many businesses begin with a dream that flourishes into a successful family business. Along the way, a real sense of pride and a commitment to hard work becomes part of the whole family's DNA. But the sad reality is, many successful family businesses begin to falter as the next generation takes over the helm. In fact,
Only 12% of midmarket family businesses transition to the 3rd generation (National Bureau of Economic Research Family Business Alliance)
43% of family businesses don't have a succession plan in place (PWC Family Business Survey)
Neither statistic is encouraging, so what should you do?
Besides leading Numeric Eight, Trudi Yip is a member of her family's business which her grandfather started in 1940.
For her father and uncle, who are in their 70s and 80s, respectively, there's no talk about retirement. They still work long hours and are very involved in the business's day-to-day operations alongside Trudi and her cousins. However, the family has recognised they need to start planning how the next generation will be included should they wish to join the business.
That's called succession planning.
Investopedia defines succession planning as a "strategy for passing on leadership roles – often the ownership of a company … Succession planning ensures that businesses continue to run smoothly after a company's most important employees retire and leave the company."
The four critical processes for developing a succession plan
For Trudi's family business, developing a succession plan took two years to put together and included four critical processes:
Regularly held, formal meetings attended by all family members involved in the business. For Trudi's family, these meetings were held monthly.
An agenda was followed with any unresolved items included on the agenda for the next meeting.
Minutes were taken at each meeting to record what decisions were made and any items to be actioned.
If there were any documents to be discussed at a meeting, copies were sent well in advance to provide family members with sufficient time to review.
According to Trudi, "When working with family, it's important to be patient, respectful and prepared to compromise. At the end of the day, it's about getting everyone on the same page with a succession plan they can work with. So don't be afraid to engage an independent facilitator who can offer objective advice and help keep the family focused on the end goal."
The Numeric Eight team includes highly qualified accountants and bookkeepers. Their range of services includes a fully integrated finance department as well as bookkeeping services. To explore how Numeric Eight may assist your family business, contact us to arrange an obligation-free 30-minute consultation with Trudi.