Canadian Plastics

Create a Succession Plan That Meets the Next Generations’ Needs

By D.M. (Doug) Robbins, president, Robbinex   



Many business owners dream of the day their sons or daughters will follow in their footsteps and assume control of the business. The owner has spent years, maybe even decades, building up the company. He or she is convinced it should, and will, re...

Many business owners dream of the day their sons or daughters will follow in their footsteps and assume control of the business. The owner has spent years, maybe even decades, building up the company. He or she is convinced it should, and will, remain in the family.

As a business intermediary – someone who sells a business on behalf of the owner – I see this kind of “succession planning” frequently.

I would estimate that handing down a family business fails at least 50% of the time. There are a number of reasons why. The second generation may lack industry experience, lack training in business management, lack motivation, or be incompatible with a management role.

Other family dynamics can come into play. The retiring business owner may find it hard to break away and may sabotage – probably unintentionally – junior’s efforts to assume control.

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If more than one child is involved in business leadership, you can get into situations where sisters and brothers are battling among themselves. Sibling rivalry can be particularly problematic if control goes to a child who is not the oldest in the family. Also, children often are not prepared to pay the maximum value for the business.

None of these problems is necessarily a deal-breaker. It just means that a little extra planning and managing are necessary up front.

One of the tools available to assess skills, aptitude and motivation is psychological counselling. At Robbinex we work with an industrial psychologist who tests both the older and younger generations in a family transfer situation. The goal is to determine areas where extra support is needed.

I can think of one family that we worked with where testing revealed the son was very skilled in the areas of marketing, community relations and promotion, but less comfortable in areas such as purchasing and accounting. His confidence in assuming ownership was compromised by his lack of confidence in those areas. We recommended that a “number cruncher” be hired to manage the purchasing and accounting functions, which then allowed the son to assume the leadership role successfully.

Another pertinent case was a family we worked with recently. The mother owned the business and had devoted many hours to its development and growth. The daughter was expected to take over, but testing revealed she was not motivated to work day and night to do it. Although she wanted to please her mother by assuming ownership, the daughter had witnessed first-hand the sacrifices her mother had been obliged to make to be successful, and wasn’t sure she wanted that kind of life.

We worked with this family to create a new management structure and a new distribution method for their product, both of which required less of a time commitment from the new owner.

The secret to a successful intergenerational transfer is a structured plan for the takeover. Once the potential trouble spots are identified, a plan can be put in place to overcome them. Such a plan might include a management transition period, special training for the incoming owner and definitions of appropriate roles for the family members involved.

In addition, we strongly recommend psychological testing when a business is being transferred within a family. It’s a constructive step toward managing the complexities of keeping things “in the family”.

To receive a copy of Robbinex’s free report, “How to create a Marketable Business”, send an e-mail request to ev@robbinex.com

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