How to Be a Family Business Empty Nester, Part 2: Four Steps to Secure Your Family Business Before Retirement
April 23, 2018
You’re probably familiar with the saying “nothing is constant but change.” It’s an inevitable fact of life and in business.
Transitioning out of your CEO role in your family’s business is both scary and exciting. Leaving your business may be a defining moment; especially since long-standing personal relationships and core family values have helped define your business’s success. A badly handled transition can not only alienate your customers and employees, it can decrease your company’s overall performance and its value in the process.
To become what we call a successful family business empty nester, first consider how your transition affects you personally. Consider about how it affects your business.
We believe, since no two family business transitions are the same, there’s no standard methodology to follow; following a framework adapted to the needs of each family and the businesses they control is best. In working with a number of family controlled enterprise businesses, we’ve created the E.L.I. Transition Process, connecting succession to a well thought-out—and designed—strategic plan.
Based on our experience, here are four steps to secure your business before handing off the reins to the next generation or a professional manager who is not a family member.
- Objectively assess your business. An objective assessment of your business—preferably by an outside advisor—helps create a clear picture of your business. Then, a strategic discussion, separate from any conversations about CEO transition plans, helps identify potential business challenges and opportunities as well as opportunities for continued growth and profitability.
- Meet with key leadership. Meet with both family and non-family team members in your company and ask for their assessments of the business as well as major goals moving forward. Take time to meet separately and one-on-one with family members not involved in the daily operations of the business to get their opinions. These inclusive conversations often help identify the critical core competencies of your next CEO, beyond simply running the business, and are based on the strategic direction of your company versus choosing a successor based on family seniority, influence, or ownership.
- Develop a strategic plan. Based on assessments of your business, as well as honest conversations with family members about their goals for the company, develop a plan pinpointing future opportunities available to the organization. What is the growth plan? How does that relate to the needs of the family and as it relates to any liquidity desires vs. long term wealth creation? Should the business be sold or acquire a competitor, or raise capital to grow? How does that decision sync with family stakeholders and core values of the company? Link the strategic plan with your transition approach and ultimately with the core competencies you believe are needed in a new CEO.
- Embark on a CEO search. After you’ve completed the first three steps, conduct a CEO search, both inside (including family and non-family members) and outside the business. Your strategic plan ensures you’ve identified the best candidate to lead the family business into the future as well as giving those interested family members an opportunity to participate in the process.
We understand that any personal or business transition can often be unsettling. It’s important to have impartial outside advise during this crucial time to make sure you protect not only your most important asset: your family business but harmony in the family as well. Contact us to learn how we can help you become a successful family business empty nester.