Succession Planning

Six steps to a family business succession plan

In the next 10 years, almost three-quarters of business owners will retire and look to transfer their family business. However, almost half do not have a succession plan, and for the majority of those who do it is only informal. Making a formal plan can be full of obstacles – and one of the biggest is knowing where to start. Michael Newton, managing partner at Fuller Landau Montreal and chair at LEA Global, advises a six-point plan


hile conscious of its importance to the survival of the business over time and across generations, it is very difficult for a business owner to know where to start to establish a succession plan.

This is one of the reasons why many of them simply have a general idea. So, where do you start?

Michael Newton, managing partner, Fuller Landau Montreal, and chair, LEA Global

1. The simplest answer is: start with the past

Why did you begin the adventure at first? What motivated you to take that journey? What are the core values of the business, and the mission you want to accomplish? Write down all your answers and organise your thoughts.

And if a trusted ‘someone else’ – such as a partner, advisor or outside counsel – was with you at that beginning, then you could do it together.

2. Assess the present

Once the first step is done, then evaluate the current situation. How has the organisation evolved and changed over the years? What has remained unchanged since its inception?

Who are the current leaders and key members of the team, and what are their strengths? How do they impact the organisation and its goals? Are these key members close to retirement? Will they remain if you sell the business?

Is the business meant to be a legacy business, building wealth over time, or creating a lifestyle (annual cash flow)? Has this changed since the business commenced?

3. Think about the future 

After comparing the past with the present, look to the future. What does the family business need to survive you and for future generations to come?

This means assessing factors that are both internal and external to the company. What does the business need to stay competitive in its market? Does it have the right leaders – beyond you! – and team players to set and execute the strategic plan?

4. Start drafting your family business succession plan

Drafting a plan requires direction, but more importantly, must begin with the end in mind – do you want to sell? Are you transitioning to another family member? Selling to management, not family?

Maybe you want to maintain ownership but work less – spend winters in Florida, summers on the golf course! If so, you may only be shifting management of the organisation and retaining ownership? Maybe it becomes a hybrid.

Now draft an updated organisation chart. Start with job functions and then map out the current team’s skill set. Take into account hard and technical skills as well as soft skills – management prowess, emotional intelligence and so on. Can these positions and needs be matched with your current team? If so, fill in names with positions. If not, what will be the action plan to fill the empty boxes in organisation chart with qualified team members not currently employed by the organisation?

Once that is done, is the leadership role filled? If so, then it’s time to bring that person into the planning process and start making it formal.

5. Make the succession plan formal

For some business owners, this step might be the hardest. Review, challenge, evaluate and then put it to paper. Once a solid, thought out plan has been drafted, share the succession plan. At first, it may be with only a trusted few, but eventually, it should involve all key players.

This plan will drive many of your future decisions. If needed, talk to everyone individually to not only make sure they understand your thought process about the implications and the direction of the business but to also get input and adjust where it makes sense.

Finally, ensure that you filter through their opinions, watching for emotional answers that contain insecurities of the unknown. This exercise will undoubtedly leave your team with as many questions as answers. Be prepared and try to anticipate their reactions before you meet them, with the goal of calming insecurities from the first discussion.

6. Find a sounding board – ask for help

Whenever you feel the need, and during any part of the process, don’t hesitate to ask for help or to see if you are on the right track, from a close friend or a trusted advisor/professional.

A family business advisor can help you at every stage of the process, from an objective standpoint, to ensure that you do not neglect some details, ask you the hard questions, and help you draft a formal succession plan with deadlines, expectations, and goals.

Or even start a family business advisory inner circle of tax, operations and legal advisors to help navigate those murky waters ahead.