Family Business Succession Planning Checklist: 6 Important Questions to Ask

Nearly all (98%) US companies that responded to PwC’s 11th Global Family Business Survey say they have some form of governance policy in place. But, just what “governance policy” means varies widely. It could be anything from a shareholders agreement (75%) to conflict resolution mechanisms (22%).

In addition, the survey found that 78% of respondents say that protecting the business as the most important family asset is their top goal for the next five years and 72% want to ensure the business stays in the family. Despite that, in 2021, only 34% said they had a robust, documented, and communicated succession plan in place.

Perhaps it shouldn’t be all that surprising that so many family-owned businesses lack a formal plan. Creating a succession plan requires having difficult discussions around emotionally fraught family dynamics:

  • Should your son or daughter be groomed to take over the helm, or should it be a non-family member?
  • Should you just sell and split the proceeds?
  • What if the company you founded and devoted your life to building goes in a different direction once you retire?

Despite widely quoted statistics that say that only 30 percent of family businesses successfully transition to the second generation and only 13 percent survive through the third generation, a Harvard Business Review report says that is not true.

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Business Exit Strategy Guide for Owners: Intro

When you were growing your business, filled with an overriding sense of potential, did you also start thinking about your exit plan?

Likely not. And with good reason. Entrepreneurs, business owners, and boards of directors are enthusiastic about their potential for success. They aren’t thinking about that moment when they are ready to retire. Or move on to a different business challenge. Or want to while away the days on a desert isle, sipping margaritas and reflecting upon their many successes.

But that day has come for you, which is why you’re in need of an exit strategy for your business.

We’re here to help.

Our six-part Business Exit Guide for Business Owners is the place to start your journey to the next chapter of your life and business.

Here’s what we will cover:

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The 6 Biggest Business Mistakes and How to Fix Them

Interim executives, by definition, come into difficult situations, assess them quickly, and create a plan for success. That means they have a front-row seat to the most common business mistakes companies make in the areas of leadership, operations, human capital, strategy, business finances, and change initiatives.

Focusing on these fundamental business needs is a good starting point for any struggling business.

3 Things Companies Can Learn from How Private Equity Firms Work to Maximize Value

Private equity firms have a simple recipe for making money: They identify companies they believe are undervalued, improve those companies, then sell them for far more than they paid to buy them in the first place.

Knowing how private equity firms work can serve as a roadmap for any company looking to improve operations and maximize value.

Start with these 3 things PE firms do following an acquisition in the lower middle market ($2-$15 million in EBITDA) to improve your own bottom line, whether you plan to continue operating your business or want to ready the company for a future PE investment.

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I once took one of those business simulation courses. In it, we were given a computer terminal, an inbox, and a walkie-talkie. Our simulated company, Acme Widget, was said to be in trouble, and the point of the exercise was to evaluate our crisis management skills. There was a team of psychologists who were looking for leadership and other soft skills that might help us do well during a pressure-filled day.

The fellow who had been chosen as simulated CEO of our team was an up-and-coming executive in a Fortune 100 company. He was clearly acting as CEO in the exercise because his company had indicated he had so much potential.

The psychologists asked the “CEO” to give his motivational speech as the simulation began.

The CEO said, “Our job is to grow revenue faster than expense. Now get to work!”

That was it.

Would it surprise you to hear that Acme Widgets did not survive the simulated crisis? The emails flew, the disasters proliferated, and the team fell apart. I thought then, and I still believe, that the CEO’s speech could have made a big difference in how our team performed.

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Seeing with New Eyes: Cross-Pollination in Business Has Advantages

When a company is in need of new leadership, chances are the board and CEO are going to enlist a search firm that will comb through the same old group of people in search of that new leader. They will search for someone who has served in that job at a similar type of company and almost always in the same industry.

It’s the way the business world works.

But is it always the right approach? Not necessarily.

Instead, Lloyd A. Perlmutter, a C-suite executive with years of experience leading businesses through exceptional growth curves, says cross-pollination in business — hiring executives outside of the industry — can be the way to get the kind of innovative ideas that spark innovation and disruption.

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2023 Predictions: Business Trends Accelerating Need for Interim Executives

Every new year means new challenges and new opportunities. This new year, 2023 is no different! When we asked 204 C-level executives for their 2023 predictions, their responses reflected five clear business trends:

  • A surge in executive retirements and leadership departures
  • Ongoing workplace changes
  • Continued supply chain challenges
  • Technology needs
  • The looming threat of an economic downturn

Let’s take those one at a time.

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12 Secrets to Family Business Success

There are some family businesses that have been around for 100 years and continue to thrive under the leadership of 5 or more generations. But they are rare – as rare as a child who loves basketball making his way to the NBA.

So notes John Messervey, an organizational behavior consultant who counsels high-wealth families through very difficult conversations about their family dynamic, their family business, and their hopes for the next generation.

His years of experience working with family businesses and entrepreneurs led him to develop these 12 lessons for family business success:

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Business Exit Strategy: Owners Neglect at Their Peril

InterimExecs founder Robert Jordan learned early the tremendous weight an entrepreneur must bear: “When you own the company, it’s nothing like being an employee,” he writes in exploring the sacred trust of ownership. “You might as well compare lifting up a hundred pound weight versus a feather.”

Jordan, who founded his first small business at age 26 and “hit every speed bump you could possibly think of, and then a couple more just for creativity points,” has learned a lot along the way. Among the most important lessons: while business exit planning is critical, it is usually neglected – at the owner’s and board’s peril.

Alejandro Cremades, author of Selling Your Startup: Crafting the Perfect Exit, Selling Your Business, and Everything Else Entrepreneurs Need to Know, agrees. He says that a company’s management team must add “crafting an exit strategy” to their business goals.

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How to Improve Your Company’s Performance: 5 Critical Questions to Ask

Every business owner is looking for ways to improve company performance. But where to start? Management consultants talk about KPIs and workflow, business strategy and culture. All important, to be sure. But in a rapidly changing world, owners and managers do well to ask themselves how they can improve business performance — even when financials look great at the time.

Often, by the time a company calls us for help, the signs of peril have been lurking or shouting out for months or years. The bottom line is that the leader missed or ignored signs of pending crisis because they failed to ask themselves critical questions.

1. How Can We Improve Customer Satisfaction?

“To satisfy the customer is the mission and purpose of every business,” said Peter Drucker, the godfather of the field of modern management. Each year, the Drucker Institute identifies the best-managed public companies in the US. The ranking gauges America’s largest publicly traded companies according to Peter Drucker’s principles of effectiveness: “Doing the right things well.” One of the metrics for performance is high quality customer satisfaction.

And it’s easy to see why customer service matters. How often do you get fed up with long call wait times, or sites that are unbelievably hard to navigate?

The days when big companies had a monopoly that meant they didn’t need to worry about customer retention are long gone. Today, customers demand that all companies — large businesses as well as small businesses — cultivate a strong positive relationship with them.

In today’s hyper competitive business climate, deeply understanding what motivates your customers and leads to customer retention must be a non-negotiable business goal.

To thrive in this economy, businesses need to take a close hard look at how customer engagement and customer satisfaction can be improved. That could mean conducting focus groups, managing a social media listening program, implementing IT initiatives to improve customer wait times, improved sales training, and/or regular customer check-ins. Every company should have a customer experience performance improvement program in place.

Knowing how well you’re serving customers right now and what you need to improve is a key measure of whether your business will be successful in the future.

2. How Can We Grow Employee Engagement and Development?

“The enterprise must be able to give [its employees] a vision and a sense of mission. It must be able to satisfy their desire for a meaningful contribution to their community and society,” Drucker said.

This is not your father’s world. Hiring someone who stays with a company 25+ years is no longer a realistic goal. But there still are ways to improve employee performance, employee satisfaction, and employee productivity. What do your team members value? Gen Zers are likely to be looking beyond pay as an incentive to engage. They want mentoring, they want some say in decision-making and they want to know that they are making an impact.

If your employees are reporting low morale, lack of communication, or turning in poor work performance, it may be because they do not feel connected to your mission and vision.

Every employee should know what your organization is trying to accomplish, why the mission and vision are good for the organization and good for them, and how they can play a part in making that mission and vision come to life.

How can you better nurture and develop talent within your team?

3. How Can We Be More Innovative?

Every business needs to spend cycles to evaluate products, services, processes, and markets. They must prune ones that are no longer relevant, and build on the success of others to continuously improve or innovate.

No sector will be spared as technology and IOT changes how we interact with products and services. Case in point: Taxis have been around for more than half a century, unchanged. Then Uber disrupted the marketplace. Hotels were the de facto go-to until Airbnb hit the market, giving consumers options to rent a whole house for the price of a cramped hotel room.

Certainly, ramping up innovation can be a challenge. Oftentimes, bringing in a fresh perspective can do wonders. There is plenty of valuable expertise in your company, but the ability to see beyond daily performance management processes and optimize for new, potentially high-performing opportunities takes a new perspective. Even if your staffs possesses the necessary skill sets to innovate, sometimes the best thinking for your business, even your industry, will come from other sectors.

What resources will you commit to R&D to learn what is working and what needs business improvement in the short-term and over a longer time frame?

4. Are We Being Socially Responsible?

If living through two years of a worldwide pandemic taught us nothing us, it’s that we are all connected. The Drucker Institute report says that management must take responsibility for the impact of their organization and do what is genuinely in the public good.

Taking time to review how your company is socially and environmentally conscious can reveal whether you are running your business as effectively as possible. What are your core values? Do people know those core values and adhere to them as to not exploit people and resources? How are you giving back to the community and your employees?

It is a priority that cannot be dismissed today. Employees as well as customers expect it.

Can you set goals that prioritize social responsibility?

5. How Can We Improve Our Financial Strength?

Financial strength is, of course, the key to corporate effectiveness. Without it, there will be no company.

“There is only one appropriate yardstick of business performance. This is the return on all assets employed or on all capital invested,” Drucker said. “To be a marginal producer is always dangerous.”

Financial numbers alone do not paint a proper picture of a company’s management style or its health, but they cannot be overlooked. Look at your company’s financial performance against where you could be operating. Are you hitting your goals and metrics?

How We Can Help You Improve Your Company’s Performance

A well-run company is a sum of many parts, and the Drucker Institute report highlights the most important pieces you must assess to determine if your business is running optimally. A weakness in one area can easily have a domino effect, negatively impacting other areas of a business.

Owners, entrepreneurs, and management teams should conduct a business assessment to get a snapshot of the health of their organizations. If there is a lack of time and leadership resources, proactive businesses find an outside leader to conduct their needs assessment.

Harvard Business Review reports that an organization has less than a 10% chance of ever recovering from a stall in growth whether it’s due to problems with execution or failing to pivot away from a core strategy that isn’t working. To avoid being one of the statistics, ensure you are in touch with where your organization sits, and what you can consistently be improving to charge into the future.

Reach out to us for a confidential consultation to assess how an interim CEO, CFO, CIO or CMO can help improve your company’s performance.