The Four Essential Plans
Perhaps the most initially “obvious” part of a succession plan, an Ownership Plan determines how ownership will be transferred and to whom. While this sounds simple, it requires a lot of thought. One must determine if it’s even suitable to keep ownership in the family, how to ensure the financial security of the current ownership, how best to treat adult children equitably (regardless of who the ownership is going to), how to minimize estate taxes, and how governance (via a board of directors) will function post-succession.
2. Management and Leadership.
This is where you get into the nuts-and-bolts of how business leadership will function post-succession. A Management and Leadership Plan can help answer many pressing questions: What’s the career plan for the original owner-entrepreneur? How will leadership be structured to teach and mentor the younger generation so they grow their personal leadership skills? How will decision-making work, and how will new leadership and management be compensated? This is also where you can pull in your Family Participation Plan™ to help determine each family member’s level of interest and involvement.
Part of this process is addressing “The Last Challenge of Entrepreneurship.” This is a plan that allows owner/entrepreneurs to step down—but not out—of the business they’ve put so much care into building. Many entrepreneurs find new positions within their company post-ownership, so while they continue to add value to the company and find meaning in their work, they are no longer a “load-bearing” element keeping the business from falling apart in their absence.
Lastly, an owner/entrepreneur must address perhaps the most deeply personal element of a Management and Leadership Plan: in addition to changing their job description so they can advise new ownership and leadership, an entrepreneur must accept that passing on ownership often signals the fulfillment of a life-long dream. This means they must develop a new dream, which could be anything from focusing on relationships and leisure time to service and philanthropy, that will continue to drive them forward.
So often, we attribute a failure of succession to a new generation being unable to capture the entrepreneurial “spark” that made the business such a success under the first owner. By collaborating as a family unit (often through a survey where each member gives their perspective on a business), families can craft a unique Business Plan that keeps the business running smoothly, pushing forward to find new success, and utilizes the experience of the older generation along with the fresh ideas of the younger generation.
Building the emotional equity of your family is just as singularly important as building the equity of your business. A family business simply cannot succeed in any healthy, meaningful sense without the family taking care of itself as a unit. Therefore, it’s imperative to create a Family Plan to ensure the emotional health, wellbeing, and continued communication of the family (see our previous writings on the importance of Family Meetings) so that the family unit isn’t falling apart even if the business appears to be thriving. Unlock Your
Inside-Out Succession Plan
Think of the Inside-Out Succession Plan™ model as a kind of succession-planning combination lock. The motivations spin around the core purpose to help the entrepreneur dial direction into succession plan thinking. Then the entrepreneur aligns his or her core motivators to each of the four planning processes to lock in a truly successful outcome. The succession plan is secure when all the tumblers line up to the benefit, interests, and capabilities of everyone in the family and across the business.
-Tom Hubler, The Soul of the Family Business