There are 3 Universal requirements for a successful family business transfer:
- A competent successor
- The Business is ready
- The owner is ready
Part 1 – A Competent Successor
A successor is competent when they have demonstrated both the ability and willingness to run the business.
For most small businesses however this is a major challenge. Yes some successors (children or employees) really aren’t willing or are unable to rise to the challenge of ownership. But a more common reason is that the current owners have failed to do three things:
- Clearly articulate the performance expectations they need to see.
- Provide both internal and external experiences to develop skills and abilities while providing a well – rounded world view
- and biggest of all, implement a phased exit process that will ultimately make themselves unnecessary while stretching the successor’s own commitment
I frequently get requests to help develop successors (both employees and children) for taking on ownership as the current owners begin to look forward to retirement. Sometimes friction has developed because the successor(s) are too anxious to take over and want to change things too rapidly or too aggressively for the current owner’s comfort level. Their attitude is I am ready now why doesn’t he / she just get out of the way. More often, the successor is stuck because they can’t quite figure out what is expected of them or they can’t get a chance to really assume a specific role.
Most current owners want the successor to demonstrate that they can be a great #2 before they are willing to think about giving up some of the ownership responsibilities. Worse some owners have forgotten the struggles of their own learning curve and think the successor should somehow just “know” what to do. Other owners remember that learning curve too well and think that they have to impose the same thing on the successor(s) even though their learning curve may now be irrelevant in today’s business environment.
I always start these projects by having the owner tell me as clearly as possible what a successful #2 would look and act like. If they need to see them voluntarily working 60 hours a week or taking night calls so be it…but say it. As you might expect very few have thought about what they want to see…they just expect to see it.
Internal and external experiences:
If you don’t provide opportunities to grow and develop both internally and from outside sources then you are only going to get what you already have: “Successor Interrupted.” My favorite mechanism is having your kids work somewhere else for a period. This does a couple of things:
- Exposes them to alternative thinking and methods, both good and bad
- Allows them to demonstrate to themselves they can succeed without being the “heir apparent.”
- Helps them develop a perspective relative to both what it’s like to be an employee and the unique environment of your own business.
Another alternative, of course, is to send them to conventions as long as you make sure they understand the “10 percent” rule: 10% of whatever you hear is blatant exaggeration.
I structure my “Blue Ocean Tours” specifically to provide these experiences via workshop immersions.
Make Yourself Unnecessary:
This may be the most emotionally taxing for most funeral directors. But if you aren’t willing to delegate increasing responsibility to your staff / kids then you are not ready to exit no matter how tired you are.
There is a great litmus test for this. You might want to sit down before you read it and have the smelling salts ready: Leave for 30 days AND DON’T CALL IN. If you get back and the business hasn’t really missed you it’s time.
Next week: Part 2 Getting Your Business Ready