Succession Planning: Setting up for future success.
June 01, 2021
Succession planning is important for any business, but it is especially true for a family business. Successfully passing the baton to the next generation and setting them up for future success is the ultimate goal.
Five out of six entrepreneurs believe a transition process can be completed in two years or less, according to a 2017 BDC survey. Experts say a transition plan can take up to five years to complete and, in the case of a family business, as many as ten, depending on the size and complexity.
Frank VanGelder, owner of Dwight Lumber since 1992, embarked on the journey of planning for the future a few years ago. “I’ve been in the process of putting into place a succession plan for my son, daughter and daughter-in-law to continue the family business one day. I learned early that this was not a quick or cheap process, and it has taken about five years to create the succession plan. I’ve met with succession planners, lawyers and accountants, and the process is expensive but, in my opinion, worth every penny. There are so many complexities that I didn’t realize. For example, tax implications are a huge factor!”
It was important to Frank to make sure all family members' interests were protected and considered, even for those family members who did not want to run the business in the future. Frank held family meetings so everyone had a voice at the table and that everyone could agree on the next steps for the future of the business. Frank says, “Above all else, I wanted unity in my family, and I did not want the succession plan to cause any discord. We made sure the plan was fair to all involved.”
Frank is preparing his family members who will take ownership of the business one day by passing on his knowledge. “I am happy that my son, daughter and daughter-in-law are interested in the family business, and I look forward to seeing them put their stamp on it to make it their own.”
4 tips for successful succession planning:
1. Solicit the assistance of a team of professional succession planners, tax accountants and lawyers familiar with business and tax law to help simplify complexities.
2. Start planning early.
3. Develop a family participation plan if it is a family business. This will help avoid unnecessary conflict.
4. Draft legal agreements.