This month on the podcast, we’re sitting down with Stephen Merlin and his son Scott to discuss what sets CPMT apart as a law firm.
That conversation turned to the question of what it’s like to run a family business like CPMT and how succession planning works for a family-owned business.
No two families will experience succession the same way. Instead, it is a multifaceted undertaking that extends beyond mere financial and legal considerations.
It gets right at the heart of family dynamics, values, and the legacy the family wants to build for future generations.
Most of all, it’s important to keep in mind that there may be some misalignment between children, especially if there’s a child who doesn’t want to take part in the business at all or in a limited capacity.
Understanding how family businesses are uniquely affected by succession is an area in which we excel here at CPMT.
Here are some of our top recommendations to consider when developing a succession plan for your family business:
1. Initiate Early and Transparent Communication
Proactive dialogue is probably the most important aspect of any business, and family-run businesses are no exception. Make sure to engage family members in discussions about the future of the business well before a transition becomes imminent.
2. Assess and Develop Potential Successors
As the current owner of the business, it’s your responsibility to evaluate the skills, experiences, and aspirations of potential successors objectively. Encourage them to gain external experience to broaden their perspectives and bring fresh insights into the family business.
3. Define Clear Roles and Responsibilities
Any ambiguity can lead to misunderstandings and conflicts. Establishing well-defined roles and responsibilities ensures that each family member understands their position and contributions to the business.
4. Separate Ownership from Management
Distinguishing between ownership rights and managerial roles can prevent potential conflicts so that everyone is confident that decisions are made objectively.
5. Develop a Formal Succession Plan
A succession plan won’t work if it’s not documented. You need to make sure it’s written down so that it can serve as the roadmap it is intended to be. This plan should outline the process, timeline, and criteria for leadership transfer. You’ll also need to regularly review and update this document so that it remains relevant and continues to align with the evolving goals of the business.
6. Communicate with All Stakeholders
Transparency is key. Keep all of your employees, suppliers, and other stakeholders up to date about the succession plan. Clear communication helps to preserve your relationships and allows for smoother business operations.
7. Be Prepared to Adapt
Flexibility is essential. Be open to revisiting and adjusting the succession plan as circumstances change, whether due to shifts in the market, family dynamics, or individual readiness.
Plan for the Future Today
If you’re committed to the longevity of your family business, you’ll need a succession plan that takes into account all of the messy complications running a family business may entail.
By approaching it thoughtfully and proactively, you’ll lay a solid foundation for future generations to build upon and protect your hard-earned legacy.
Do you need help making sure you’ve developed the right succession plan for your family business? Get in touch with us at CPMT today!