A paper written by American scholars William O’Hara and Peter Mandel lists the oldest 200 non-American family businesses still in operation. With the first established in Japan in 578 and the youngest in Australia in 1802, they span from 6 to 46 generations and include many household names. They’ve survived war, pestilence, plague, financial meltdown and, no doubt, the occasional heated boardroom battle. Not one of these legacy businesses has survived by accident.
When you’re building a business, you’re more likely to be focused on feeding and supporting your family than creating an institution to pass onto them. But once its established and you begin to see the results of the energy, effort and passion you’ve poured into it, your thoughts may turn to its longevity and the mark you will leave on the world.
Successful first-generation businesses rely heavily on the skills and contributions of their founders. They often grow to be team-leader, CEO and board in a single package. Even if they’re fortunate enough to have children interested in following in their footsteps, succession will rarely occur organically and requires thorough planning to cover all aspects. It’s harder still without a new generation to take the reins. A quite different approach will be required to achieve a beneficial exit.
Taking an operation from dependency on the founder into a viable succession model demands a substantial shift in thinking and culture. Appointing, developing and empowering a management team is a major step but it doesn’t come easily, whether it involves family members or employees.
Separation of ownership and executive powers is a major step in building business resilience and creating capacity to successfully continue operations while progressively reducing founder control.
Whether you’re handing over to the next generation or selling to a new family of owners, skillful review, assessment and thoughtful planning can position any business for smooth succession.
Remember, it is never too early to start planning for succession. The earlier you plan, the greater the success. If you would like to discuss your options further, please don’t hesitate to contact us at NKH Knight on 08 9367 8133.
Written by Heather Moore