The numbers are staggering:
- 24,000,000 small businesses in the U.S. today
- 95% are family-owned or closely-held
- 85% of business owners’ state: “I want to pass this business on to the next generation”
- 65% will transition ownership or leadership within the next 5 years, but most have no formal succession plan in place.
- 30% of family businesses survive into the second generation
As a consultant, I work with many, many family owned businesses in Michigan. When I start to relate the numbers to not only my clients, but my friends, I realize the incredible importance of having a succession plan. Imagine the impact on a company, a family, the employees, and a community without one. So if this is so important, why don’t more family owned businesses do it? This is what I hear:
• No time to deal with the issue
• Too early to plan for succession
• Can’t find adequate advice/tools to start
• Too complex and costs too much
• Don’t want to think about leaving
• Might create conflict with family or employees
What I tell people is, “There will always be a reason not to do it.” You need to have a plan that will make the difference between whether your business will endure, or succumb. Keeping it simple, you need to:
1. Define your personal goals and vision for the future
2. Define what you do – get to the detail of what the expectations of a successor would be
3. Identify a successor – if internal, identify gaps in skills and knowledge and mentor/train him/her – if no one fits the position begin a plan to recruit from the outside
4. Define the role of family in leadership and ownership – waiting too long can be a big mistake
5. Have your business valued
6. Create a contingency plan
There are more steps to consider and much more detail – that’s why you need to get started today!
Mike Beels is a Program Manager in MMTC’s Lean Business Solutions program for over 7 years.He has trained and mentored hundreds of Michigan manufacturers in the entire portfolio of Lean strategies and methods. He has also facilitated “Train the Trainer” workshops and performed financial and operational assessments at manufacturing and service facilities. Michael has lead the “Lean Office” Program at MMTC, creating the presentations, simulations and associated documentation to help improve organizations on the “carpet” side of the business.