I find it interesting how many times, when Succession Planning comes up in a conversation, that subject immediately focuses on family businesses. I was interviewed by a local business journal and never mentioned family business in our conversation but, sure enough, that's all was talked about in the article! Even my comments were edited to relate to family businesses.
True, every family business needs to have the transition from one generation to the next fully thought out well in advance.
The senior generation has to be prepared to let go and move on.
The incoming generation has to be prepared to assume the reins.
The company has to be organized to execute the transition in an effective, seamless manner.
The legal and financial programs need to be in place ready to be implemented at the right time - often over a period of time.
And all this has to happen for non family businesses, too! In many ways the issues that must be addressed are the same - except the family businesses may have to deal with more emotional issues.
All succession planning involves the senior generation members acknowledging their mortality and making plans for moving into what I call the 'third phase' of their life. Staying in a state of denial can rob the company of any potential to survive and proper into the future.
Most owners want their company to continue on. That also means identifying and developing the future leaders well in advance of the time for the transition to actually take place. In some instances, it may mean recruiting new future potential leaders (and owners) if the current people don't have what it will take.
But, when the 'next generation' was never developed, an internal sale isn't an option. Then, sale to an outside party is the better answer. And sometimes the external sale can generate more retirement income for the seller.
In every transition, family or non family, the challenge is to work out a myriad of details well in advance of the 'event.' More on that later.
The bottom line - whether a family business or not, developing and implementing a successful transition takes time, planning - and a will of the current owner to let go of the comfortable present to move into the different future.