Succession can take two forms . . .

Succession involves a transfer of ownership, or management of day-to-day operations, to a successor which might be a family member or someone outside the family. It can be accomplished by gift or by sale.

Succession planning is a dynamic, on-going, complex process whereby prospective leaders are identified and assessed, and their business leadership skills developed. Businesses are typically structured to continue in perpetuity. Therefore it is incumbent on the current leader to ensure the very best business practices exist, and that they will be sustained and improved upon by the successor.

Most family businesses thrive as a result of the passion, commitment and energy of the founder. The odds are against the heirs maintaining that drive.

Succession requires careful assessment of the qualifications of the successor. There is a natural inclination to ignore certain issues, due to the relationship of the business owner to the chosen successor. However, certain key questions must be asked and answered in the affirmative, such as:

• Does the intended successor have the technical, interpersonal and financial management knowledge necessary to perform the requirements of the position?
• Do other managers and employees respect the intended successor professionally?
• Do the business’ customers, suppliers and banker believe the intended successor can adequately replace the retiring owner?
• Will the qualifications, capabilities, and prior training of the successor have a positive impact on the company’s future performance?

Ignoring these issues rarely eliminates potential problems, in fact, it frequently exacerbates and intensifies them. Often there are bad feelings and fewer options available when the issues are finally dealt with at a later date.

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