If you're on a journey to build wealth and have embarked on the path of starting a family business, it is never too early to plan for succession. Even if your children are young and your focus is on growing the business, planning for the future ensures a smoother transition when it's time to make the decision. As we celebrate Child Month and cherish the children in our lives, it's an opportune moment to implement a succession plan for your family business.
What is succession planning?
You might be familiar with the popular HBO series Succession, which portrays the story of a super-wealthy family, the Roys, in which the children are vying for control of their patriarch's media empire. Though fictional, it draws inspiration from real-life tycoon Rupert Murdoch — an Australian-born American media mogul, and his six children. A significant theme in his story is the succession planning for his media empire, which has generated tension between his sons Lachlan and James as they both vie for control of the companies after their father's eventual departure.
While it may seem like "rich people problems", succession planning is essential for businesses of all sizes as they all have the potential to grow and sustain the life of your business for the next generations if the right strategies are employed. Like the tycoons of today, you too can expand your business, positively impact the community, and keep it within the family, and in doing so build generational wealth.
Succession planning, then, is really about developing potential successors and preparing them for a smooth transfer to leadership roles to ensure the continuity of your legacy.
Many small businesses fail to grow and evolve across generations due to a lack of succession planning. Rather than treating your business as a mere hustle, recognise its potential to build generational wealth and become a valuable financial asset for your family.
One of the key advantages of a family business is long-term family involvement, fostering a shared knowledge and value system. If you want your first-generation business to thrive with your family's continued involvement, start planning for its continuity as early as possible.
Nurturing Your Children's Potential
Bernard Arnault is the French founder, chairman and CEO of LVMH Moet Hennessy Louis Vuitton SE, the world's largest luxury goods company and, as of April 12, 2023, was named the wealthiest person in the world, per Forbes. All Arnault's five children work at LVMH, which demonstrates a clear intention to involve them in the family business and carry on his legacy. Similar to Rupert Murdoch's story, Bernard Arnault's succession planning revolves around his children and ensuring the continuity of his business empire for future generations.
Tips for Early Succession Planning
•Get your children involved in the business early. While it shouldn't be forced, providing on-the-job training by letting them work for the business during summer holidays will give them a better understanding of the business and its industry.
•Discuss the importance of money and the business's potential to generate wealth. If you have not done so already, use Child Month as an opportunity to initiate these conversations.
•Help them build financial literacy through age-appropriate methods. Encourage saving and investing early, linking their prosperity to the success of the business.
•Consider engaging in family discussions about the future of the business, which can create a sense of ownership and commitment among all family members.
•Mentorship is another crucial aspect of succession planning. Identify potential mentors within your industry or among successful family businesses to provide guidance and support for the next generation. This will not only help your children gain valuable insights but also create a network of trusted advisors to lean on as they navigate their roles in the business.
Engaging the next generation is a vital aspect of succession planning. Find ways to involve them in the family business experience as early as possible, setting the stage for a successful transition in the future. With thoughtful planning and open communication you can lay the foundation for a lasting family legacy that spans generations and continues to build generational wealth.