Succession Fireside Chat: How to make good decisions for your family business during the succession process

Family-owned businesses are complex — and if you are considering succession, you may be wondering which steps to take next. How do you make good decisions to benefit everybody involved in the process? 

In the first episode of our Succession Fireside Chats series, MNP’s Lynne Fisher and Eben Louw discussed the key elements of good family business decisions. They also covered what to include in the decision-making process to achieve a successful outcome.

What are the best practices of making good decisions?

These best practices can help guide your decisions about the future of your family business during the succession process:

Define your goal

It is important to keep the original question you were trying to answer in mind during the decision-making process. This will help you define your approach to reaching your goal. For example, you may be asking yourself if all family members should have an opportunity to be involved in the family business in some manner in the future.

Answering this question will involve approaching the members of your family to determine what conditions are necessary to achieve this goal. You may find that everyone has a different answer — and that a solution that satisfies everyone may not be possible. However, it can also help you identify conditions for success and the approach you must take to achieve a satisfactory outcome.

Prioritize transparency

It is essential to communicate clearly with your family members during the succession process. Transparency will help ensure everyone is informed about the decisions you are making for the future of your business and the reasons for those decisions. It will also help you avoid surprises at the end of the process — reducing the risk of making last-minute changes to your plans.

Many business owners fail to communicate their succession plans to their family members — and are surprised when their chosen successor has no interest in taking over the business. Prioritizing transparency early will ensure all your key stakeholders are informed and on board with your plans long before you begin the succession process.

Identify key decision-makers

Every family has its own process to guide family decisions such as where to go on vacation — or business decisions such as how to handle inventory purchases. But ownership decisions, such as major capital investments or allowing employees to buy into the business, are much more complex. These decisions have more factors at play and need to be made at a higher level. 

Identifying who should be included in the decision-making process for succession is even more complex. Some family businesses either have too few people involved or too many — creating complications that may take time to resolve.

It is critical to identify who has a voice in the decision and who has a vote early in the process. Additionally, consider who will ultimately be impacted by your decisions. It may be worthwhile to include each of these key groups in the decision-making process — either in a decision-making or consulting role — for their insights and knowledge.

Structure your decision-making process

Each family makes decisions for its business differently. While some may rely on the consensus of every family member, others may favour a majority vote between a few key decision-makers. Setting up policies in advance can help you define how decisions are made in your business.

While this approach may seem formal, it is helpful to have a set of rules that everyone can refer to throughout process. Policies can include who is able to make decisions for the future of the business and how decisions are achieved. This helps clarify expectations and reduce uncertainty during times when emotions may be running high.

Get comfortable with discomfort

It is important to get comfortable with tension to make good decisions for your family business. Succession is time-consuming and it may take years to reach a resolution. The process may also expose unexpected questions to answer and additional decisions to make along the way — and uncertainty produces discomfort.

Many business owners choose to resolve issues quickly to reduce discomfort. However, it may be more beneficial to sit with those questions a little longer despite the tension. This will enable you to give each decision the attention it needs, find ways to simplify complex situations, and make fully considered decisions.

Take the next steps

The succession process is complex, and every family is different. However, following best practices such as prioritizing transparency and structuring your decision-making process can help achieve a successful outcome for your family business.

If you need support on your succession journey, contact a member of MNP’s Succession Services team. We can help you develop a succession strategy that works for your unique situation.