Most Family Businesses Don't Have a Succession Plan in Place, But That's a Huge Mistake
Succession planning is a critical part of any strong business.
In 2014, I achieved something that’s considered a dream for many: I became president and CEO of GSR Brands, the fast-casual restaurant organization my family founded in 1965 that now boasts two restaurant brands in its portfolio, Gold Star Chili and Tom & Chee. It was a long process, but one that, in retrospect, I’m honestly glad I went through. By the time the decision was final that I’d assume leadership of our family business, I knew I was ready. The last six years have seen us expand the business and thrive, even as we continue to deal with the pandemic.
I do, however, have a secret that, according to the research, I share with many of my C-suite peers: There is no succession plan in place for my retirement. Succession planning is a critical part of any strong business; the barriers to doing it successfully, however, have prevented me and countless others from starting and completing the process.
But I am making a commitment now to start planning for my eventual succession. Here’s why you should be doing the same.
Succession should never be a birthright, even in a family business
“Seventy-five Percent of Small Businesses Don’t Have a Succession Plan” — that was the headline of a Dayton Daily News article that stuck with me for several reasons. “Could three-fourths of America’s small businesses really be without a plan for who will take over next?” I remember thinking to myself. Then I realized my company fell into that 75%. Why? The reasons make a lot more sense than you might initially think.
In many family businesses, succession can be as simple as the oldest child or immediate family member takes over once the current leader steps down or passes away. That, however, fails to account for whether the person is qualified or wants to do so.
I grew up in my family’s business, and, after graduating college, spent 10 years working in the marketing department. Then, for reasons both financial and personal, I left — and it was the best decision I ever made. I got my MBA and worked at other companies, eventually becoming CEO of a fast-casual chain. That time away from the family business provided invaluable learning, but also proved I could be successful in a leadership position at our business.
After the original “core four” founders decided to step back from running the day-to-day of our franchise restaurant business, three outside candidates served in the president and CEO role, each with varying levels of success. When they were looking for a new person for the job in 2014, I threw my name in for consideration. It was only after my experience, business plan and references were vetted, however, that my vision won the job — not my DNA. As I start to consider my succession, finding the best talented individual — whether he or she is a family member or not — will be top priority.
My suggestion? Begin by taking an honest look at your requirements and your bench for the right candidate. If that candidate isn’t within your family or current leadership, now’s the time to find and bring that person on board.
Allow time for proper planning and transition
Watching the Olympics this summer gave me a true appreciation for preparation and transition. Athletes train for four years for just two weeks of competition against the best in the world. Once that’s finished, many go on to the next phase of their lives. It can be tough, but it’s an inevitable reality they all know is coming. In much the same fashion, family businesses would be wise to start planning for what comes next, preferably a minimum of 36 months prior to the transition. Ideally, you’re planning much further in advance.
There are benefits to advanced planning. You can review processes, changing dynamics and goals. You can also avoid power struggles. It gives you a chance to thoroughly vet candidates to avoid picking the wrong person. It also allows you time to come to grips that one day you’ll no longer be in charge.
I love what I do, but I’m 56 now and don’t see myself working for decades to come. On the other hand, thinking about life away from the business I’ve dedicated a large part of my life to is scary. A large part of a person’s identity can be tied to his or her career. If I’m not a business leader, what am I? Succession planning can help you find outside interests that will allow you enjoy the next phase of life.
Even if your retirement is years or decades away, make time now to start planning for when you’ll no longer be with the company. What you decide is best for your business today can and likely will change in the years ahead, but having the plan in place is key to your work surviving after you’ve left it.
Don’t set up for failure by failing to plan
To other leaders who haven’t done it already, my message is simple: Start planning your succession now so that the process can be smooth, efficient and prevent having the right person come into the wrong situation.
There’s an old expression you’ve probably heard before: No one plans to fail, but many fail to plan. That strikes a chord when it comes to succession planning.
We all know that sometimes things don’t work out despite our best laid plans, but don’t let that stop you from trying. Having a plan in place at every step of your journey of owning and operating a business is important because it allows you to have those conversations about what you want to see happen. Then you need to gather your family and employees around that vision.
If something were to happen to you tomorrow, would your business survive? It’s a question you need to be honest about with yourself, and if the answer is no, act now to ensure your business will survive long-term.
Overcome these barriers to ensure your family business will thrive well beyond your years.
Entrepreneur Leadership Network Contributor