A succession plan is crucial for family businesses

Having a family business mandates you have a succession plan in place to ensure sustainability. Without one, chaos can reign when the founder passes away or is incapacitated, and too often, poor decisions are made. I have seen very successful businesses implode under these circumstances, but this fate can be avoided.

Having a family business is tough. I like to say it is like having a regular business on steroids. With a family business, you have all the responsibilities of a normal business, plus some very important additional considerations. Above and beyond dealing with all the issues related to running a viable and profitable business, you must also be concerned with the family’s best interests. Sometimes this is quite different from what is optimal for the business.

While running a family business, there may come a time when you must choose between the family and the business, which is why I always ask these entrepreneurs what is more important to them -- the business or the family. There is no right or wrong answer here. What is important is that all the family members agree. The succession plan rests on everyone sharing the same goals and objectives.

When selecting successors, families often designate the oldest child by default, which does not always work out well. Other times, parents do not want to pick because they do not want to show favoritism.

The best way to go about picking a successor is to have an outside person come in, evaluate the children and make a recommendation about who they believe is the best suited to lead the company. This works very nicely because an outsider is able to assess the siblings’ potential objectively.

Once a successor is selected, the next step is to ensure they have the requisite skills to step up as the CEO when the time comes. It is important they acquire the right knowledge and skill set by going to school or being mentored. Simply choosing someone you feel has the potential to do well is only half of the story. You must also ensure they have the tools to be successful in the job.

Now go out and make sure you have a feasible succession plan for your family business. Remember that when you choose your successor, you must first select the right person then invest in getting them the skills they will need to be successful.

You can do this.

Dr. Osteryoung has directly has assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is a bestseller on Amazon.com. He can be reached by e-mail at jerry.osteryoung@gmail.com.

Tags: Florida Small Business