Firstly, I would love to take the opportunity to thank Kersten for the opportunity to present at the recent FTMA conference. I would also like to thank all of you who attended my presentation.
As a quick recap, below are the statistics I mentioned on the day:
• 70% of transitions to the next generation in today’s environment fail
• 95% of failure is due to insufficient communication
• While 5% is due to inadequate structure and weak financial elements
• 6% of businesses owners manage to exit via sale
• Only 2% of owners that manage to exit via sale are happy with the final outcome
• If not managed well, the 6-8 years that succession planning will take, statistically result in a 60% decline of profitability.
I recently shared these statistics with my father who argued that these numbers could be seen as proof that there would be little point to attempt a succession process and that perhaps one would be better off just to let the future run its course.
Ironically, this approach is almost certain to create the exact outcome that he fears most – the loss of what has been created in and for our family since 1947.
His reaction was a wonderful insight into the reality of what most founders/current owners are faced with and the sheer magnitude of the complexity that the journey ahead seems to hold.
Often it seems impossible to set an end goal with so many variables that need to be addressed. Variables include complex factors such as financial considerations, family considerations, leadership considerations and many more.
Where Do You Even Start?
A good starting point is to focus on the foundation piece, which means starting conversations with the family about what tomorrow should and could look like. These conversations should be held before attempting to come up with financial, business or ownership structures.
Conversation starters could include:
• What do the family members think about their involvement in the business in the future?
• Should the business stay in the family?
• Is the business profitable enough to provide an ongoing dividend to ensure the current generation can retire in comfort or can the next generation afford to buy into the business now?
• If they want to buy into the business now, what is a fair and equitable approach?
• How will the next generation approach leadership and working together?
These are just a few of the questions that a family has to work through as a collective to start their succession journey. In reality, you cannot create a future business strategy without involving the individuals who are going to be the future for your family and business.
As a starting point for communication with your family members about their thoughts regarding the family and business, I have provided a questionnaire which you can access here.
You can use one copy to talk through each point one by one as a group, or you can provide a copy to each person to complete and return (preferably without a name on it).
My guess is that you will be amazed just how much the answers given by other family members can differ from yours, even though you might have expected everyone to be on the same page.
If you are stuck, or if you would like help to start aligning the family and the future for your business, my contact details are below:
susanne@liquidgoldconsultants.com.au
0410 501 099
These are going to be the some of the most important conversations your family will have about your business and its future, so please ensure you do have them before it is too late.