Family Business Succession Planning: Who Runs It Next

Family business succession planning is how you decide who runs the business after you. It is also how you get that person ready. A good plan names the next leader. It lists what they need to learn. And it sets a date. Most of the work is not legal work. It is teaching, and letting go.

What is family business succession planning?

There are two parts. People mix them up.

Who runs it next. This is the day-to-day. Who sets prices? Who hires? Who talks to the big customers? Who does the owner's job when the owner is gone?

Who owns it next. This is the paperwork. Whose name is on the business? Who gets paid, and how? A lawyer and a CPA do this part.

The two do not have to be the same person. Your daughter might own the firm while your best foreman runs it. That is a fine plan. What fails is having no plan at all.

When should you start a succession plan?

Start years ahead, not months. It takes time to teach someone your job. It takes more time for the crew and the customers to trust them.

Many owners are closer to the door than they think. In a 2023 Exit Planning Institute survey, 49% of owners said they want out within five years. If that is you, the clock is already running.

What are the 5 D's of succession planning?

The 5 D's are the ways an owner leaves without choosing to. They are death, disability, divorce, distress and disagreement. Any one of them can force a handover with no warning.

The Exit Planning Institute guesses that about half of exits are not planned. In the same survey, 41% of owners had no written plan for any of them. A succession plan is how you choose your exit before one of these chooses it for you.

Who should take over a family business?

You have three real choices.

1. A family member. This works when they want the job and can do it. Wanting it matters as much as skill.
2. Someone on your team. Your manager or lead hand may know the work better than anyone. They may run it while the family keeps owning it.
3. An outside buyer or hire. Sometimes no one inside is right. That is not a failure. It is a choice.

Pick for skill, not birth order. Ask each person what they want. Then watch how they handle real decisions. A son who hates the office will not run it well, even if he is next in line.

How do you get the next leader ready?

Most owners hand off too late and all at once. Hand off a little at a time instead.

1. Write down what only you do. Pricing, big bids, hiring, the bank. Make the list. It is usually longer than you think.
2. Hand off one item at a time. Start with the one you are best at teaching. Stay close for a few months.
3. Let them decide. If they still ask you every time, nothing has moved. Agree on what they can decide alone.
4. Tell the team and the customers. People follow who they are told to follow. Say it out loud.
5. Take time away. Leave for two weeks. See what breaks. Fix that next.

How do you write a succession plan?

A succession plan can be a few pages. It should answer these questions in writing:

• Who runs the business next? Who is the backup?
• What does that person need to learn, and by when?
• Which jobs move to them first, and on what date?
• What can they decide without you?
• What happens if you die, get sick or cannot work tomorrow?
• Who owns the business next? (Your lawyer drafts this part.)
• How will you be paid as you step back? (Your CPA helps with this part.)
• When will you check the plan again?

Put it in writing. Then read it once a year.

What does a succession plan look like in practice?

This is a made-up example. It is not a client.

Dave owns a heating and cooling company with three trucks. He is 61. His son Mike runs one truck. His office manager, Jen, has been there 12 years.

Dave's plan names Mike to run the field side and Jen to run the office. Over two years, Dave hands Mike the scheduling, then the bids, then the hiring. Jen takes the billing and the bank. Dave's lawyer and CPA work out how Mike will buy in over time. Dave takes a month off in year two to test it. Two things break. They fix them. In year three, Dave works two days a week, by choice.

What if no one in the family wants the business?

That is common, and it is fine. You can:

• Sell to someone on your team, over time.
• Hire a manager to run it while the family keeps owning it.
• Sell to an outside buyer.

Each path takes the same first step. The business has to run without you. Buyers look hard at a business that cannot run without its owner. A manager can only run what is written down.

What are the downsides of succession planning?

Planning has real costs. It takes time you do not have. It brings up hard talks with family. And it can upset people who expected the job.

But no plan costs more. If you leave without one, someone else decides who runs your business. It could be a court, a bank or a buyer in a hurry.

The usual mistakes:

• Starting too late. The plan becomes a fire drill.
• Choosing by birth order. The wrong person gets the hardest job.
• Keeping it secret. The team learns from rumors and good people leave.
• Not letting go. The new leader has the title but not the say.

How we help with succession

Altus Financial is a business coaching firm in Northampton, MA. Who runs it next is one of the four areas we work in. We call it Transfer.

We start with Discovery. That is three to six months inside the business. We find what only you do. Then we build the plan to hand it off, one job at a time. After that, we meet each month to keep it moving.

We don't write legal papers. Your lawyer does. We don't do your accounting or your taxes. Your CPA does. We work with both of them.

Want to talk it through? Book a Founders Call. It takes 20 to 30 minutes.