Planning for Succession in a Family-owned Business
Autologica presents part four in a series of articles that address some of the common problems and situations that arise in family-owned businesses. The articles are based on an interview between Al McClymont, CEO of Autologica Dealer Management Systems, and J.C. Aimetta, an expert and coach who specializes in family-owned businesses and who has ample experience consulting for this type of company.
Al McClymont: An essential issue in family owned businesses is succession planning, a complex subject from whichever angle you choose to look at it.
A family business owner may feel quite reticent about handing over such a responsibility to a son or daughter. Or it may be possible that there is nobody really prepared or eager to assume that task.
There may also be complications, for example if there is more than one sibling, if there are in-laws, if the siblings have diverse qualifications, or if they have varied interest in the business. All of this can affect succession.
I recently read a story about an 80 year old dealership owner in the United States who finally decided to plan his retirement, only to find that his son, who he considered his only possible successor, was announcing his retirement as well. A dynamic owner who waited too long to transfer the authority and responsibility of the companys management.
I have no doubt that succession must be carefully planned, with sufficient time, so as to prevent any possible surprises.
J.C. Aimetta: Of course youre right. But first of all, it is necessary to define what we mean by a successor.
Because when we speak of a successor, there are actually two successors: one who succeeds the founder in the management of the company, and another who succeeds the founder in the ownership of the company. We can say that one is an heir and the other is the new CEO.
So we see there are two entirely different figures. There is one heir who will become the general manager, and other heirs who will not. Therefore, the management successor must understand that he or she is managing what in part is not his/hers, and must render accounts to his/her siblings as they would to any shareholder.
The problem with this is that rendering accounts is not a customary practice in a family-owned business because Dad never did that, because he was both owner and manager, and nobody renders accounts to himself. Hence, it must be learned: he who administers what is not his must render accounts to the legal owners.
Moreover, owners must legitimize, in the sense of making legitimate, of validating, the choice of the successor that will administer what is all of theirs.
When the choice is imposed by the father, and this is the cultural model in many countries, it is generally, not always but generally, the eldest of the male sons who is chosen.
And thus may a problem arise if the siblings consider that the eldest son is not the best person to manage what is theirs, if he is not the person they would have chosen for the job.
And what is even more absurd, many times the chosen one lives his responsibility as a family obligation and not as a benefit, because if possible he would not have chosen to be the manager of the family business.
In the next part of this interview, well talk about specific problems that may arise regarding the plan for succession.
Read the previous articles in this series:
- Part 1: The main reasons a family-owned business can fail
- Part 2: What happens when one family member wants to sell their share
- Part 3: How to reconcile the interests of family members who work in the company, with the interests of those members who dont
2006 Autologica SA
Al McClymont is founder and CEO of Autologica Dealer Management Systems (http://www.autologica.net). Founded in 1994, Autologica helps automotive, agricultural and construction equipment dealers around the world increase their bottom line through the use of its Windows-based dealer management systems and CRM tools. Autologica has a presence in South Africa, the Middle East, Asia-Pacific, Mexico and South America. His blog can be found at http://www.thelightisgreen.com
J.C. Aimetta is a consultant to more than 65 small and medium family-owned businesses. Negotiator in family conflicts and in the sale of family-owned businesses. Professor on the subject in graduate and post-graduate courses in 3 Argentine universities, and has given conferences in Panama, Guatemala, El Salvador, Costa Rica, Colombia, Ecuador and Venezuela.
Can Your Kids Be Employees?
Small business owners operating as sole proprietors can save tax costs by employing their children. Used properly with the ri...
Do You Really Need The Services Of A Divorce Lawyer?
Filing for a divorce case is quite a painstaking and tedious task but it can be made simpler if you employ a skillful divorce...
Financing Is Now Easier for Women through Business Loan
Present era is known as woman era. Today woman can do everything, whether its going to the moon or looking after her family. ...
Basics of Exponents
When a certain number a is taken n times and multiplied in succession ( n 1 ) times , thecontinued product so obtained is ca...
Divorce and Pets in California
In most cases, pets are treated just like all other marital property because they are considered personal property under stat...
The 10 Worst Mistakes You Can Make when Selling Your Privately Owned Small Business
Thinking about selling your business? You are not alone. CNN Money reports that 35 million baby boomers are expected to retir...
What Every Woman Needs To Know About Divorce
Are you considering divorce? Im talking about quiet, sober consideration of a question, not the thoughts that flare up from t...
All In The Family Business
Today there is a lot of work to be done. We need to send out our emails from yesterday's orders. The website needs to be upda...
SBA’s 8(a) Program Can Help Some Companies Compete
Q: A friend told me that as a woman of Native American descent I might be eligible for a special SBA program that will help m...
Advanced Internet Marketing - How to Use a Sales Funnel I
If you want to analyze your total sales process and find out at what stages potential customers are lost, then you should lea...
Goal Personal Planning Setting Success - Step 1
One of the most important keys to success is a goal personal planning setting success process. A series of studies and interv...
California Divorce: What is a California Summary Dissolution?
In California, a summary dissolution is a simple way to get a divorce with the possibility of not having to appear in court f...
Homeschool Parents - Helpful Hints For Your Role As College Planning Counselor
College planning is essential for all high school students and parents. It is especially important for homeschool parents. Al...
Choosing The Right Homeschool Curriculum For Your Family
Any first time homeschooler can recount the details of their first homeschool convention. Some may have wonderful experiences...
Tips For Preparing For Home Schooling Your Children
If you have recently made the choice to educate your children at home you are in for a exciting journey. Not only will a home...
Divorce And Family Law
Divorce is one aspect of family law. Family law deals with all the family related issues such as adoption, prenuptial agreeme...
Goal Personal Planning Setting Success - Step 2
In our previous article: Goal Personal Planning Setting Success. Step 1, we talked about creating your long term and short te...
5 Reasons NOT To Have a Marketing Plan
Imagine your perfect customers -- the ones that will eagerly buy your products or hire you for premium pay. Imagine being abl...
Business Process Consulting - Mentoring Staff Development
Successful business owners and effective managers pay careful attention to running mentoring programs in their businesses.In ...
Small Business Owners Remember SALTT!
An entrepreneur's main goal, typically, is to profit, but most start ups fail to maximize the potentials of tax planning. Wh...