Suc­ces­sion plan­ning cru­cial in fam­ily firm

South Waikato News - - NEWS -

Suc­ces­sion plan­ning is es­sen­tial if a fam­ily busi­ness is to sur­vive more than one gen­er­a­tion and re­tain its value.

This check­list will en­sure this doesn’t hap­pen and will guar­an­tee max­i­mum fam­ily in-fight­ing.

Never plan ahead. Act as if you are in­vin­ci­ble.

Get fam­ily mem­bers to work for the low­est pos­si­ble money. Keep them in line by im­ply­ing they’ll get a big­ger slice of the ac­tion than other fam­ily mem­bers later on.

Don’t tell fam­ily mem­bers what is hap­pen­ing in the busi­ness. If you have to com­mu­ni­cate, give dif­fer­ent fam­ily mem­bers only snip­pets of in­com­plete in­for­ma­tion.

Pro­mote fam­ily mem­bers work­ing in the busi­ness to lofty po­si­tions with­out giv­ing them any for­mal train­ing or on-the-job coach­ing. That way they will keep mak­ing mis­takes and en­sure you can never be re­placed.

Do not have an up-to-date will. Pro­vide per­sonal guar­an­tees for all com­pany bor­row­ings. Don’t bother about a share­hold­ers’ agree­ment or a mem­o­ran­dum of wishes for the trus­tees about how things should be han­dled if you are not able to do your job.

Yes, this is tongue-incheek ad­vice. But these things hap­pen more of­ten than we would like to ac­cept. Given the high num­ber of fam­ily-owned busi­nesses in New Zealand and the need for these to continue for fu­ture gen­er­a­tions, the tricky sub­ject of suc­ces­sion plan­ning must be ad­dressed.

It is not about what hap­pens if you die.

The driver should be plan­ning for your re­tire­ment or for what hap­pens if you wake up one morn­ing and de­cide to do some­thing dif­fer­ent.

Who is be­ing trained to step in for you? If fam­ily mem­bers are un­in­ter­ested or un­suit­able, ap­point an out­sider.

If con­flict is likely within the fam­ily, ap­point a third party with the right ex­pe­ri­ence to be a trustee, di­rec­tor or in­de­pen­dent ad­viser to the com­pany.

The bot­tom line is that the prin­ci­ples of good man­age­ment and good busi­ness gov­er­nance ap­ply to fam­ily-owned busi­nesses.

Though it seems like com­mon sense, those run­ning fam­ily busi­nesses are of­ten work­ing ex­tremely hard and do not take enough hol­i­days, let alone spend time on big-pic­ture is­sues like suc­ces­sion plan­ning. Pick your likely suc­ces­sor, then ask your­self if this per­son would have been your choice had they not been a rel­a­tive. Does he or she have the right skills for where the busi­ness is at? What train­ing might en­hance these skills?

Al­lo­cate time with this per­son where you work on the busi­ness rather than in the busi­ness.

En­sure you pay a mar­ket salary and that you are not rip­ping them off on the prom­ise of a fu­ture share of the cake.

Pre­pare for the worst and en­sure the busi­ness is pro­tected in the case of a re­la­tion­ship break­down.

Our track record in New Zealand for hav­ing life-long re­la­tion­ships is not great. If you sud­denly have to re­fi­nance to pay out half the busi­ness to your pre­vi­ous part­ner, the value will soon be de­stroyed.

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