Is your family business transition ready?

The 17th September was National Family Business Day, and amongst our cookie-eating team celebrations we were excited to hear from Grant Thornton and Family Business Australia with their Family Business Survey 2021. Succession planning was the overriding theme this year, with a nod to how it proved valuable during the pandemic. 

TRANSITION READY = MORE RESILIENCE

It’s safe to say that the past 12 months played out differently to what we imagined here in Australia. Whether you were faced with your shop or restaurant temporarily closing, or (like us) moving back to full-time work from home, it’s been tough. Businesses have needed increased resilience to get through a period of uncertainty.

In the survey’s findings, only 27% of transition-ready firms decreased revenue in the past 12 months, vs 39% of the non-transition ready businesses. They also found that 58% transition-ready businesses actually reported an increase in revenue, vs 42% in non. 

This came down to governance; with transition-ready businesses being 50% more likely to have a documented strategic business plan, along with formal processes in place such as ‘incorporating family values’, ‘planning processes’ and ‘conflict-resolution mechanisms’. The data shows that the transition-ready businesses had better governance in every category surveyed. It shows a theme that they’ve looked to the future and are ready for change and challenges as they arise. 

READY TO MAKE YOUR TRANSITION PLAN – NOW WHAT? OR MORE IMPORTANTLY, WHO?

The first question to ask is whether you have a specific family member in mind to take on the role – only 52% of those surveyed had this. The next question is, do you believe they have the potential and are prepared/ready to step up? There can be a misconception that there’s a ‘chosen one’, but what if there is no obvious choice? Belinda Lyone of Complete Office Supplies explained that for her and her sister, they decided their complementary skills would be better suited to Co-CEO positions; something that’s worked to much success.

Another trend for the next-gen is to go out and seek other work first – something that Belinda experienced herself. Her father, Dom, insisted that she went to work at different companies and developed skills before returning to the family business. This approach ensures you come back with a wealth of life and business experiences that you can transfer into the business.

TIPS FOR TRANSITION PLANNING

If you’re ready to get your succession plan in motion, here are some of the tips Belinda had to share:

  • Take your time. Don’t feel rushed into making snap decisions. Have regular discussions over a long period. It can take years of going through the ins and outs of the business and ‘sticky points’ to come to an agreement.
  • It’s like nothing ever happened. The transition should be so smooth that you don’t notice anything’s changed. Business continues as usual without hiccups due to extensive preparation in the run-up.
  • Increase meetings close to the handover. As the next-gen prepares to step in, make sure to sit down together frequently to ensure everything’s in place and all questions have been answered.
  • Accept you might need help. It might be worth bringing in an external company, like a succession planner. They can offer a fresh pair of eyes and notice things you may have missed as family members being so invested.
  • Include the wider team. Though the initial conversations must of course be between family members, it’s important to remember that it’s not just your family that will be involved in the change. Your staff AND customers want to know that there’s a plan and they’re in safe hands. Once you’ve made a decision, announce it to the leadership team – make sure to give advance warning and be transparent to avoid hushed conversations and uncertainty.
  • Be comfortable with hard conversations. Transferring leadership is confronting. You need to be prepared for uncomfortable conversations around finances as power shifts. Remember that those running the business will be used to doing things a certain way and there will almost certainly be a period where they struggle to step back and understand it’s no longer their place to make decisions. 

IS YOUR BUSINESS TRANSITION READY?

We hope this has given you some food for thought on who’s in line to take over leadership. As conversations start to arise, our final tip is to make sure your succession plan is formally documented. If not, it can sit ‘in development’ for years, lacking clarity for your board.

Findings taken from the National Family Business Survey 2021.

Sophie Coldham

Written by: Sophie Coldham
Published: October 26, 2021

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