How to start Succession Planning

How to start Succession Planning

Knowing how to start succession planning is not easy, there are many moving parts to it and lots to consider. This can put a lot of people off starting the process or leaving them not knowing how or when to start.

In this episode I share some tips on how to get started.

1 – Start Early

2 – Separate out the different elements of succession

3 – Look at the role of Family Governance

4 – Keep an open mind

5 – Have open and honest conversations

I also cover when to get started and without wanting to ruin the surprise, the answer is NOW!



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How and When to start Succession Planning


Welcome to this week’s episode of The Family Business Podcast. It’s going to be a solo show today, and I’m going to be covering ‘how to start succession planning’, which will be a brief episode, rather than going into a huge amount of detail. It’s obviously a very complex area and there’s no one size fits all.

Happy New Year

So it’s very difficult to, to just come in on the explain here’s step one, two, three, and four, but hopefully cover enough to be of use if nothing else. Before we get into that, firstly, this is the first episode that I’ve recorded since the new year. So happy new year to everybody. I hope your 2021 has started as well as it can given the current.

Situation and circumstances. A few people I’ve spoken to kind of echoing my own views in that this has kind of started a bit ‘Meh’. If I’m being honest, it’s, there seems to be an awful lot of enthusiasm around the end of 2020 for obvious reasons. It’s a horrible year. And we woke up on the 1st of January, 2021 with not much changing and here in the UK, we’re now experiencing a, another full lockdown.

So as I record this at the moment, my neighbour has decided to cut their grass and my other half and kids have decided now’s the time to do a PE lesson with Joe Wicks. So if you hear either of those on today’s show I apologise. It’s just the reality of the situation now is weird. We’re homeschooling were both trying to work from home, which has been pretty good so far, I have to say not, too difficult to cope with it. But obviously if if you hear any kids shouting at the TV or my next door neighbour’s lawn mower, then then, please forgive me.

I think one of the important things that I have realised at the beginning of this year is to continue to focus on the positive elements that are out there. We are seeing globally that there are vaccines being rolled out across. Many different countries and, and that’s obviously a huge positive. And whilst this locked down for me, certainly feels a lot different.

Although as I record this, the sunshine, which is what I think my neighbours taking the the opportunity to cut his grass. The weather has been pretty cold and miserable, and whereas last lockdown, particularly in the UK, we had some nice weather, some early summer sun at the end of the school day for the kids.

They could go and play in the garden and get outside and experience some warmth from sunshine on their face. And this time around it’s not quite the same. So it does feel different this time, but , I recorded an episode right back at the beginning of the pandemic last year that was entitled Reasons to be Hopeful.

And I think those still stand, we are still one day closer to this pandemic being, I don’t want to use the words ‘over’, but certainly more manageable with life returning to normal and the strength of human ingenuity and adaptability has been shown over the last 12 months. And I’m sure will continue to be shown over the coming months as well.

So I hope everyone’s doing okay out there. I hope the business side of things is going as well as it can, I know some businesses are doing great because of the industry or particular product that they sell, but also understand that there’s other businesses out there that are struggling.

So, as I’ve said in the intro, and I say openly to get in touch, if I can help I’m here to do so and you can find more information on the podcast website as to how to do that also quick.

Thank you again for everyone signing up to the newsletter, it’s great to see so many new names joining the list.

So if you haven’t done so already head over to the podcast website, there’s a newsletter sign up field there, put your first name and email address in and press a button and you are on the list and you’ll get a little thank you email from me as well for that. So please head over there and sign up and I can send you blogs, videos, podcasts, all sorts, straight to your inbox. 


So let’s have a look at what we’re going to be discussing today. So this past series, has all been focused on Succession Planning,  and so we’ve looked at various different elements of succession planning and various different stories from people who have gone through that experience. Got another couple of interviews coming up with family businesses who have gone through a succession process. And so I’m looking forward to bringing those to you over the coming weeks. But what I thought I’d cover this time round is ‘How to Start Succession Planning’.

How to Start Succession Planning

Now, this could be a really quick episode because I could say how to start is “just get started” and when to start is “now”, if you haven’t done so already, but that very, very much so oversimplifies a very complex position, a very complex subject matter. And what I think it’s important to do is to contextualise the challenge that’s being faced around succession planning and a study by PwC identified that 43% of the family businesses that they surveyed don’t have any plans at all.

And 23% of those businesses that have a plan, have them documented.

So in essence, succession planning as a challenge to face as a family business is one of the very common, more common issues that families will be facing. So if you’re listening to this thinking, I haven’t started anything to do with succession planning, and I don’t know where to start.

You are not alone. That is not something where you can just pick up a tick sheet and go, right. We’re done. We have a succession plan. It is a process, it is one that almost starts on the day you set up the business or the day you joined the business, but it is certainly not straightforward and there are many different elements to it.

Because this is such a complex area. What I thought it would be useful to do on this episode is just to break it down into five tips. Now that is not to over-simplify what is needed in order to have a successful transition and to have a plan in place that is effective. It’s much more than just these top five tips, but they are starting points to help you get to the point where you can start going into much more detail around those plans.

Start Early

So the first tip that I would suggest is to Start Early and most articles, most family business advisors who work with family businesses around their challenges on succession, I think would agree with me that it is far better if you start early than it is to leave it too late.

The reality is that the decision around succession planning is not something that will be put off forever. There are events that will happen that will force those decisions on you. So for me, it’s far better to have choice and control over what happens to the family business and it is to leave it to chance and the potential stresses and strains that can come from not having a plan in place at all.

So starting early and having a plan in place is invariably going to be better than not having a plan in place. But one of the key things to remember when it comes to succession planning is that it is a process. It is something that takes a long time, just because it’s on the agenda for the next board meeting it doesn’t necessarily mean that every single decision around the succession planning discussion needs to be concluded or held at that point.

There is a famous saying that “a journey of a thousand miles begins with one step”. And I think that is very true of the transition planning that needs to happen when we’re talking about this broad subject of succession planning. 

Separate the Different Elements of Succession

Now because it is such a broad subject, my next tip would be to separate out the different elements of succession planning. So what I mean by that is there is typically succession planning needed for ownership of the shares in the business, the management of that business and the leadership of that business.

And by separating out those elements into separate strands and having separate plans in place for each of those breaks them down into more manageable chunks.

You’re not going to cover  each of those thousand miles in the first a hundred or 200 steps, but you are making progress towards getting to that final destination by having that plan in place

Separating out the various elements of succession planning as well, allows you to break each of those down into its individual elements.

It doesn’t have to be something that is all swept up into one conversation and one decision.

I actually recorded an episode on The Three Elements of Succession with Daniel Trimarchi  from KPMG, and if you want to go back and check out what we cover on that episode is Episode 61 and it is called The Three Elements of Succession. And it covers in a bit more detail, the ways in which to separate this out and how to deal with it.

So that it does break it down into more manageable chunks. It breaks it down into separate streams or strands or whatever you wanna call it. But it does make life easier by doing this rather than trying to keep everything in one broad subject.

Look at the role of Family Governance

So I recommend checking out that episode and the next tip in my top five tips for how to start succession planning is to, in order to make life easier for you in dealing with the issues that succession planning can create is having a look at what Governance you have in place for the business and in particular around the Family Governance.

So there’s a whole series dedicated to this that was recorded last January, so if you haven’t listened to this series on Governance, head over to the website, and there’s a tab there that you can click on, that gives you the whole collection of Governance episodes. But what governance allows you to do is to have a discussion as a family around issues like who can own shares in the business.

Now what that helps to do is it, it, firstly, helps to document the views of the entire family around that particular subject matter. But when it comes to things like succession or transition planning, it’s almost as if there’s a, a guide set out before you from your previous discussions that can make life far easier.

So if, for example, it’s decided in your Family Charter that only bloodline relatives can own shares in the business, and the intention of the business is to provide ownership opportunities for family members in the future. And he’s never envisaged that this would be sold. It makes a decision around ownership, succession slightly more straightforward than if you haven’t had those discussions.

Now that’s not to say that governance is set in stone, but it at least gives you a guideline and a track for you to run on when it comes to having these discussions around succession. If we take another example around management,  some families have a criteria for their next generation to join the business, a path that they have to follow and certain sets of qualifications or experience that they have to demonstrate in order to take up a senior role within the business.

That means that if you’re then talking about management succession and there’s nobody within that next generation that has completed that, that you’re going to have to look at alternatives either as a bridge until the Next Gen plug that gap. Or if in fact there is nobody suitable in the next generation to take on that management position because they followed their own career paths or they have not followed the.

Suggested path into the family business, then it means you’re going to have to look outside of the family for people to take on those management roles. But again, it gives you something to refer to, it gives you some guidance and not only for you, but also for future generations as well.

So it’s quite a big subject in itself Governance, which is why I recorded a whole series on it in January last year.

But it can really help with discussions around succession planning. And that was highlighted again, in an episode with Jim Grubman from July, 2020, that was entitled Successful Transitions in Family Business. And it goes much more into the detail of how governance can help with the successful transition within family businesses.

So check that out too.

Have an Open Mind

My next tip is to approach all of these discussions with an open mind, try to leave your assumptions of how others are going to be within those discussions at the door and give everybody the opportunity to be heard and to speak in any discussions that you’re having around succession or transition.

Having an open mind means that we, we lose a lot of our preconceptions about the route that people either feel they have to take, or that there is an unsaid an unwritten pressure to take on a role within the family business from a next gen perspective, or that the senior generation has to give up a certain role or a certain responsibility as part of it.

Having an open mind to that allows you to perhaps have more open discussions. 

Speak Openly and Honestly

My final tip for how to get started is to have an environment where you can speak openly. And honestly, with each other about your expectations about your hopes and dreams and desires for what you want out of life and what role the family business may play in that, be that as an owner or somebody who works within the business.

Now, again, this is one of those things that’s really easy to say “just be honest with each other”, and I fully appreciate that there are circumstances and relationships that don’t allow that to necessarily be the case. And that’s where the role of an external facilitator can come in. So somebody like myself or another family business advisor a lawyer who might be able to give you some advice as well on the legal structures that are going to be needed, but having that objective party there to help facilitate those discussions and create an environment where it’s very safe for everybody to be open and honest with each other is an invaluable way to progress things, because if we are left to our own devices and we let our emotions take over, or we don’t have the correct structure in place for those discussions, then they can often head off on a tangent or they can bring up bad memories about previous discussions where things perhaps hadn’t gone quite so well.

So having somebody there to help facilitate could be a good way of fast-tracking these discussions and getting over some of the bumps in the road that are invariably going to crop up when we’re talking about succession planning.

So to summarise those five tips. The first one is to start early and we’re going to come onto that in a second.

When we talk about ‘when’ to get started number two is to separate the elements out. So talk about ownership, management and leadership separately. Again, they are linked, so I’m not being naive in thinking that you can just deal with one issue and it not have an impact on the other, but separating it out, allows you to break it down into more manageable chunks.

The third tip is to look at what Family Governance you have in place and if there’s nothing there that outlines how succession in terms of say ownership or management is to be dealt with perhaps have a look at introducing some Family Governance to help you to make those decisions in the future, not just for the generation that you belong to, but also for future generations who may come across these types of challenges themselves in a few years time.

The fourth tip is to have an open mind when you approach these discussions so that any preconceived ideas or any assumptions that you have made can be left at the door.

And then finally, the fifth tip is to create an environment where you are able to talk to each other in an open and honest way, and that may need facilitation, it may need the help of an objective third party, but it is very valuable to have that honesty and openness and the management of expectations.

And so those are the five tips I’d give around ‘how’ to get started.

When to Start Succession Planning

Well, when it comes to when to get started again, to, to steal an old, I think it’s a Chinese proverb of “the best time to plant a tree is 20 years ago, but the second best time is now” the same is true when it comes to talking around succession planning and in particular, the intergenerational discussions that need to take place. The acceptance that everybody within the family system and the business system is going to be impacted some way or another by each of these transitions.

And so each and every one of them will be facing their own individual challenge around that. Again, to varying degrees, depending on how impacted they are by it, but if the next gen, for example, are keen to move into a management and ownership position, but there needs to be certain criteria met for them to do that.

The more time they have to fulfil those needs the better, and so starting early on these discussions and creating a roadmap and a process for that is advantageous to everybody.

With any type of succession plan or transition there are going to be financial and technical elements that need to be put in place.

And again, by starting these discussions earlier, you’re going to be in a better position to inform your financial and legal advisors of the type of structure that’s going to work for you because you’ve had those discussions, you’ve explored the opportunities with each other, and you’re not trying to rush into creating a solution to something that is a shorter term problem, rather than having it as a long term plan.

If Not Now, When?

So when to start, if you haven’t done so already is now, my question to you and challenge to you is “if not now when?” Because as we know the best time to plant a tree was 20 years ago. The second best time is now. And therefore, if that’s true for succession planning, why put that off any longer than you already have?

If you need help, if you need support, if you need structure, then get in touch. I can help with that or speak to your accountant, speak to your lawyer about the type of plans that they may have. Just a note of caution on that is if you are unclear around things that relate to the more emotional matters, such as whether the next gen are the right people to take on the business, whether the senior gen have done enough preparation for what they’re succeeding to. Tackling those first, before putting any legal or financial structured in place will probably save you a lot of time and a lot of money and allow your lawyers and accountants to do a more precise job on what you actually want.

Having discussed those emotional matters, then get into the end of that transaction and thinking actually something doesn’t feel right. And we would have covered that in the episode with Denise Logan on The Seller’s Journey of some of the excuses and reasons that come out right at the end of a transaction, because some of the emotional issues haven’t been dealt with.

So as I say, if you need help on that, then please get in touch. And I look forward to bringing you more episodes on families that have gone through this process and have done so successfully, and they won’t have done it in a perfect way. They won’t have done it without any issues or hiccups or bumps in the road, but they have gone through that process.

And so sharing and listening to their story hopefully will be extremely valuable. And look forward to bringing you those episodes in a couple of weeks time. As always I’m here to help get in touch. But until next time, take care.