The Pitfalls of Not Planning for Succession in a Family Business

The Pitfalls of Not Planning for Succession in

A Family Business

by Dr Edgar Paltzer

THE PITFALLS OF NOT PLANNING FOR SUCCESSION IN A FAMILY BUSINESS

Forward planning for the succession of a family business is essential if it is to have the best chance of being successful once handed over. There are several pitfalls that can occur when a succession plan is not put into place.

Financial Risk When the CEO of any company steps down, there is likely to be a period of uncertainty.

Without a proper succession plan, this can lead to financial risk through lack of stakeholder and investor confidence.

Where the succession has been planned well in advance, all stakeholders can be reassured that the new CEO has been tried and tested.

2

Loss of Skills or Knowledge A solid succession plan involves grooming a successor to take over, which means the skills and knowledge of the current CEO can be passed on.

When this does not happen, invaluable experience can be lost, which can be detrimental to company performance.

Power Struggles Without a well-thought out succession plan, retirement can lead to internal power struggles that can harm the business. If everyone is informed of the plan well in advance, this is less likely to occur.

A SOLID SUCCESSION PLAN INVOLVES GROOMING A SUCCESSOR TO TAKE OVER, WHICH MEANS THE SKILLS AND KNOWLEDGE OF THE CURRENT CEO CAN BE PASSED ON. 3

You can learn more about the succession process by visiting the blog of Dr Edgar Paltzer.