Prior to the onset of COVID-19, a US study2 conducted by the Conway Center for Family Business showed that fewer than half of family CEOs who are planning to retire within 5 years have selected a successor; in Canada, only 36 percent3 of small business owners report that their families are aware of their succession plans.
Retirement and succession planning can give CEOs the confidence to retire earlier, however, knowing that their business is in safe hands with the next generation.
While there are many considerations, here are four core elements:
- Management process planning to ensure family members clearly understand the expectations and responsibilities required to take over the business and determine if the potential management capability and interest exists within the family.
- Family and ownership structures with well-defined rules. A family constitution and family council can help address these issues.
- Leadership succession strategies can help assess and identify the right leader to lead the business forward. This may include developing a program to train and mentor the next generation of family members or identifying business professionals outside the family for senior leadership roles.
- Communication and implementation of the succession plan to help identify all the risk factors and ensure everyone is equally informed on the goals, process and timelines.
In the event that a decision is made to exit the family business altogether, an entirely new set of considerations comes into play. If this is something you are considering, I encourage you to read “Transition: Family business dynamics” (PDF 1 MB), which, provides a good starting point for examining the options for management and ownership transition.
Passing the reins to the next generation or a non-family member is not always easy. Without question, the pandemic, has shaken things up and accelerated the need to adapt to change and seize new opportunities. It is a stark reminder of the vital importance of forward thinking and planning to ensure that family businesses and future generations continue to be successful.
In-depth interviews with family business leaders across the globe provided us with firsthand and profound perspectives on their retirement plans. I encourage you to read their stories in a series of articles published on the KPMG website beginning in October.
>> Download the STEP Project Global Consortium 2019 Global Family Business Survey.
With the need to prioritize a succession or governance strategy, the KPMG Private Enterprise Family Business Dynamics Assessment can help. This complimentary online assessment is dedicated to helping family-owned businesses like yours evaluate key opportunities and issues commonly identified by business families globally and can be used as part of your strategic planning as you chart a new course into the new reality.
Interested in learning more about how KPMG Private Enterprise can help with succession planning for your family business? Contact your KPMG Private Enterprise adviser or find a KPMG Private Enterprise Family Business adviser.