STAGES OF SUCCESSION IN FAMILY BUSINESS
-For families in business nothing is more challenging than succession. Part of the problem is that succession is a multi-disciplinary task, involves multiple stakeholders, and is a once-in-a-lifetime challenge for most entrepreneurs.
1. Clarifying the goals and priorities Both incumbent and successor have to clarify their goals and priorities with regard to succession. For the successor it is important to clarify his or her commitment and abilities to take over the firm.
2. Reviewing the firm’s strategy Many small to mid-sized firms face strategic challenges at the moment they should be passed on. To make the firm an attractive target to be taken over, the firm has to be made strategically ready.
3. Planning the transition of responsibilities When the firm is sold to a strategic or financial investor, ownership, board, and management responsibilities are passed on quite rapidly. To avoid misunderstandings along this process, both parties should agree on a governance roadmap that specifies the timeline.
4. Valuing the firm Inheritance tax regulations, especially in common law countries, set firm valuation standards which cannot be departed from.
5. Financing the succession Just as in valuation, the relationship between incumbent and successor will influence the concessions the incumbent is willing to make regarding financing.
6. Defining the tax and legal setup There are important international, and sometimes even within country, variations with regard to the legal and tax implications of a family business succession.
Family Business' Blog 