Succession in a Family Business

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Who is Jacob Aldridge, Business Coach?

“The smart and quirky advisor who gets sh!t done in business.” Back independent since 2019.

Since April 2006, I’ve been an international business advisor providing bespoke solutions for privately-owned businesses with 12-96 employees.

At this stage you have proven your business model, but you’re struggling to turn aspirations into day-to-day reality. You are still responsible for all 28 areas of your business, but you don’t have the time or budget to hire 28 different experts.

You need 1 person you can trust who can show you how everything in your business is connected, and which areas to prioritise first.

That’s me.

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Transcript

Anna Karenina taught us that happy families are alike, and every unhappy family is unhappy in its own special way. The same is true with family business succession. The challenges you face are going to be that little bit special based on your business, your vision, and of course your family. There are some guiding principles and this week I’m going to talk us through a case study of a successful family succession I recently helped coach.

Now I got a phone call from the father. He said, “Jacob, got one more thing that we need to do with the business. We’re about to move premises and then it’ll be done. The business will be perfect it, will be ready to hand over to my sons—neither of whom at that time worked in the business. Now whenever a business owner tells me that business is done, is perfect, I get scared I get very worried for them because it means they don’t have that next big vision. They’re not looking at how they can constantly and improve, and if you’re not looking to constantly improve in your business, one of your competitors is and that will lead to problems down the track. So, I knew we had to act fast, and this was the conversation we had.

The first thing we needed to do was work out structurally where the next generation was going to step into the business. Now in this case, we thought we might have been planning a three to five-year entry for those sons; in fact, they both stepped up when they were given the opportunity. When they knew dad was finally serious to hand over, both were working in the business full time within six months, which is a testament to that family. We had to work out where they were going to fit. This was the existing structure. Dad is the CEO, a long-standing general manager operations manager, and then this sales team that just kind of floated around. So, the obvious opportunities would have taken one of the sons and make him the sales manager.

The other son has less experience in the business, so we put him in underneath the general manager and basically built a 12-month plan for him to get around a whole lot of different roles and understand the business. What we didn’t want to do was very quickly bring a son into the business and replace the CEO; replace dad. We wanted to slowly plan the journey from dad to become chairman and son to become CEO. This is a saying, I love sharing; I stole it off a great mentor of mine a guy called Nick and it’s relevant for any strategic project you and your business. If you tell your team in advance, it’s an explanation. You tell them in whizz, it’s an excuse.

So, you want to work with your team to make sure that they’re involved in the planning of any change, not just the change itself. Because when there are issues with the change, and I guarantee you no matter what change you’re putting into your business there will be issues, if the team has been involved up front, you’ve had conversations about some of the difficulties and what you’re planning to do to mitigate those, then the team feel they’ve had that explained to them. They’re on board with the change management process. If you have problems, you haven’t communicated, and you turn around to the team and go, ‘Well that was always going to happen’, it just sounds like an excuse. You don’t get their buy-in. So, the team were very excited to have both sons coming into the business to be able to see that once more the business had a big vision. It had a long-term future that gave them sustainability, opportunity, and career progression.

The last thing we needed to do with this business, and a conversation I have in any family succession situation is what are we going to do with the next generation when they come in to make sure that they can fairly rapidly step out of the parental shadow; make their own mark on the business, so that the team the clients are not constantly comparing them to dads and mum, to the way we always used to do things. It doesn’t have to be big; just something that lets them stand their mark on the business and in this case, there were a couple of things that we identified and were able to work on, but a big one was having a conversation about revenue growth. If this represents the current revenue sales, where the business had been at for several years, we had a specific conversation about whether the sons were going to come in and help rapidly grow than the revenue and sales from the existing products, or whether they were going to create a separate product—a product extension.

In this case, that’s what they opted for. Something completely separates the dad had never developed for their business, but something that they had seen as an opportunity within the business. They saw an opportunity to take some of the products and services that were being delivered, repackage them differently and release it new product. In fact, they did that new brand and a whole separate side business. As a result of that, this second business is right now as profitable as the original business. So, mum and dad who still own part of the company have got a business that’s twice, in terms of profit, twice the size as the one that they handed over to their sons.

Now in this situation, one of the great benefits they had was the sons who are willing to step up, and no issues around family, this unity of disharmony, which is one of the things that can show up in family business. If you have the conversation with your family, if you plan and if you have the conversation with the team about the future, then you’re a step ahead of most family businesses when it comes to succession. You’ve got the ability to make that family succession happen smoothly as opposed to finding yourself throwing the next generation under the train.

Next Steps

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