Transferring Ownership of Your Family Business: The Key to Success and Sustainability

Let's start with one very important thought that everyone leading a family business should consider:

Transferring ownership of a small family business requires strategic vision!

Developing a Sustainability and Strategic Vision for Your Family Business entails constructing a picture of your desired future; having a vision is having the Ability to think about, imagine, or plan for the desired future. A life vision is, therefore a picture of the dream life you would love to live today and every day. The Ability to think about or plan the future with imagination or wisdom. What are the main characteristics of a vision? Research on visionary leadership suggests that visions have five characteristics: a picture, a change, values, a map, and a challenge (Nanus, 1992; Zaccaro & Banks, 2001).

A visionary is someone with a strong vision of the future

From this above information, I see real value in applying Vision to personal, professional, and organizational assignments. Again, we can identify that alignment is vital to success, yet most do not work for alignment proactively and on the front end. They take what they get and wander in the desert of doom.

To be a Visionary Leader, especially in a small or family business, has value, and to be a head in the clouds dreamer may not have as much weight. Again, it allows art and science to enter the equation personally, professionally, and organizationally. There is a lot to this, and it is not easy, so most do not do it!

I wanted you first to understand the benefits of Vision in your world. The Ability to uncover hidden trends circling us is the main benefit to consider from my vantage. There are many, but for now – discover hidden trends. How will these trends affect the transfer of ownership?

This concept informs us that one with Vision is out of the weeds, in the helicopter, and aware of happenings around them. They dare to reflect, are aware of their strengths, have the integrity to engage authentically, and have courage enough to stand alone if required to harvest the results of the Vision.

My big idea here is that Vision is critical for success, sustainability, and the transfer of family business ownership. You will go nowhere without clearly envisioning where you want to go. That simple. Distraction abounds around us – focus on Vision is your friend.

The Family Business Succession Process

Like anything, everything has a process. Succession requires excellent strategic planning, disciplined implementation, sound reporting management, and great care. Add to this family, and matters become more complicated. Everyone must focus on the ball and, most importantly, care about the outcome. The transfer of family business ownership has many more components than traditional business. There are several high-priority items to consider and manage while developing a sound family business succession plan.

Change is often difficult for any enterprise, and internal and external forces can complicate family enterprises. Succession is complex at the G3 level as outside parties of influence become magnified and more diverse.

30% of family businesses survive the transition from first to second-generation ownership. 12% survive the transition from second to third generation. Only 13 percent of family businesses remain in the family for over 60 years.

And 47% of family business owners expecting to retire in five years DO NOT have a successor.

Score.org, Mar 2, 2023

The statistics tell the story and the transfer of ownership is complex. The mantra is to be prepared and work to earn succession success. Many struggle with change, family and non-family members alike. Success is found by assembling all stakeholders and getting them on the same page. Collaborating and driving the mission together will enhance teamwork. Unified by a shared strategic vision, there is a far more significant percentage for success. Trust is required and must be earned by all. Missteps here can lead to failure.

Earning commitment is necessary for succession to work. The entire team must be on board. This can be a difficult time for many family organizations. Not every team member will make this journey. They may begin the motions, but ultimately, they may not be committed to the organization's next phase. That is okay; there are no square pegs in round holes on this one.

Here is a valuable process to consider in family business succession.

JRCI Six-Step Succession Process For Family Business 

If the planning process outlined is insufficient, additional considerations for success exist. Below are a few to consider to get the ball rolling

Understanding cultural heritage

• Where are you doing business physically?
• What are the cultural family values?
• Are these values transferable
  

Family wants & desires

• Balance of family interest & business dimension
• Depth of financial pockets vs. warmth of hearts and acceptance

Availability of talent

• Figuring out if inside or outside talent is best
• A blending of non-family and family members
• An additional team with new skills is required for success

Similar to most processes, there are phases to be aware of. Here are the basics to reference what stage you may be considering or are currently in. It is not easy to get yourself geared up for the change and succession that will take place, and the entire team must get on board and be willing to make succession a reality.

Consider the following:

JRCI Phases of Family Succession

The Pre-Phase Detailed

• Preparation is key…. Eventually, things will become "Engaged."
• More family members are trained and informed about how to do things
• Discuss early (four-five years?) in advance
• Understand when succession is triggered – not just planned events
• Understand family responsibilities (competent leaders, develop structures & processes, legitimized power) & family values (constitution stuff)
• Nurture a culture of succession for all promising executives (workshops, responsibilities)
• Develop leadership qualities & performance skills
• Have worked with others in the organization to see passion, conflict, and challenges
• Involve board early on – helps remove drama

Engaged Phase Detail

• Clients express concerns
• Banks suggest more directors
• Non-family members are concerned about their careers
• The challenge lies in the process
• Experts, self-interest, loss of focus, leadership styles

Post Phase Detail

• Relating people to one another
• Realignment of interests, demands, and priorities
• Implementation and acceptance of new ideas
• "They don't realize that, particularly after they are formally anointed as CEOs, they must establish their credibility with and authority over these spheres of influence."
• "They must cope with family members, especially siblings, and cousins whose support may be vital to control the enterprise, as well as manage several other constituencies."

Tie it Together for Transfer of Ownership

Developing Sustainability and Strategic Vision for Your Family Business entails constructing a picture of your desired future; having a vision is having the Ability to think about, imagine, or plan for the desired future.

As mentioned, the process dictates success; to wing succession is to fail before the start. Building the correct team to assist the process is the key to success—trust matters. Build a team you trust and a team that has you as the priority.

 Here is a framework to establish the visionary basics of family business succession planning. This process, done well, is very strategic. This is complex and requires experts to mentor and navigate the process. A trusted BAIL team is required: Banker, Accountant, Insurance Agent, Lawyer, and a strong business coach to keep momentum and support the culture. This team will serve you well in the process. To go it alone would be foolhardy.