More than 85% of Indian businesses are run by families. The incredible commitment and passion towards their family business and creating a difference make extraordinary contributions to the growth of the economy.
However, living in Indian society, we often face certain challenges that make us typical in society. One such challenge is transitioning businesses across generations. Continuity planning is essential for your family legacy. Nurturing and guiding the next generation of leaders and successors is a prevalent issue faced by current business owners in the family.
Ownership of your family business can be passed on easily. But the same cannot be told about its management. Some suggest that it’s better to bring in professional managers if your family isn’t interested in managing it.
Nevertheless, regardless of how challenging it might be, the transfer of your business to the next generation is a crucial thing to plan. Read this blog to learn what exactly is succession planning and why you should prepare for it.
What really is Succession Planning anyway?
Succession planning is a documented plan about the transition of the ownership, leadership, and managerial rights of your business. It is an ongoing process that leads to handing over your family assets to the next generations.
An ideal continuity plan prepares for all the loopholes the future may bring from the siblings, cousins, or other possible business owners or shareholders. Succession planning lets you structure the future of your family business, including decisions about ownership and management and protecting family wealth and relationships.
5 Reasons Succession Planning is Important
Plans always work for the best. That’s a very common ideology. But when it comes to larger associations of plans regarding legal matters, we often tend to lag behind for many reasons. Let’s not do that anymore and learn about why one should care about succession planning for the business.
Change is the only constant!
You never know how your business might unfold in the future. Succession planning can be a way to hold your business like a rock at times of sudden changes. It’s super easy to replace employees and ignore the day-to-day patterns in your business but this path leads you down to unsustainability.
Would you not care if an employee leaves work mid-contract? Sure, you can hire one to replace them. But, how far will this go on given the increasingly competitive nature of salaries in the market and loss of intellectual capital? Something to think about!
Discover your vulnerabilities and fill in the gaps
Succession planning enables you to assess the risks and reveal the vulnerabilities and fill in the gaps in your business effectively. By implementing a department organizational structure analysis, you can inspect your weak points and plan a business strategy to mitigate those weaknesses.
In the process, you get to motivate your best skills and focus on talent planning internally.
Upskill your workforce
Succession planning isn’t always about linear career progression. You need to come up with alternatives for cases when there isn’t a transparent path for your best talents’ progress. You cannot let your best talents leave the organisation, can you?
An effective training and development program can help motivate your employees to move in the right direction that’s more in line with their skills. A good continuity plan takes into consideration such goals and objectives for the future of your business.
Transfer of knowledge and process refinement
When you take in employees for your business organisation, you are practically investing in the growth of your business. You nurture the workforce with skills, training and development courses, practical knowledge, challenges, and various experiences. After a long tenure, such an investment shows colours. And employees tend to leave the business or retire.
Succession planning lets you stop this drain on the business and directs you toward a smooth flow of changes. Prioritizing succession paths allows you to plan the departure of employees, hence the transfer of knowledge. And if you take our word, most retiring employees would love to see their labour bearing fruits most favourably!
Besides, you can review the internal processes and procedures in case the current methods need refinement. Bear in mind that ambitious succession candidates are always on the lookout to bring positive change to the business to clear the path towards their election. They will consider the concerns of the outgoing members regarding pitfalls and weaknesses and work on them.
Long term plans
Another reason why you should plan your succession is to improve the retention of the best employees by offering ample growth opportunities. Long-term planning can help your organisation minimise its reliance on recruitment.
Succession planning supports workforce continuity rather than resourcing. This is a good business strategy you cannot deny!
How to do it?
The next-gen is close to providing all managerial services for an effective business succession plan. Considering all factors - legal, taxation, and finance - business succession planning involves a few certain steps:
- Establish your goals and objectives for your business, followed by those of the succession plan
- Initiate a decision-making process and document the same, informing all parties
- Identify the “Who” and the “Why” of the succession
- Address the business and owner estate plan
- Consider all considerations and keep a changeover plan ready
Not every business succeeds. But if you plan well, and engage the next generation in managing and leading your business, you’ll be one step closer to saving your time and money.
An out-of-the-box solution
Heard all of the above already? Well, here’s an additional tip about making succession plans: WILLS. A Will is one of the most preferred ways for a continuity plan, for passing over your assets to the next generation.
Wills include the details of all your assets and specify the order of distribution after the testator’s (owner of the Will) death.
Need help drafting a Will as the first step to succession planning? You’ve come to the right place. Book a consultation call with us today and our legal team will be happy to assist you through the process.