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17 January 2015
Like many entrepreneurs, you may want to hand over the reins to someone you trust – quite possibly your children. To ensure your business survives and even flourishes after transferring it to the next generation, a well-considered succession plan – preceded by a family business strategy – is essential, says Jannie Rossouw, head: Sanlam Business Market.
“Not many family businesses have proper succession plans in place. It means having conversations most people would rather avoid, involving family emotions and expectations, and the one subject more likely than any other to cause family rifts – money. Approached in the right way, however, a detailed succession plan will not only ensure the future of your business, but also that of your family,” says Rossouw.
To start with, it is advisable to draw up a separate strategy document outlining your family’s shared business vision and values. “This document should set out how you as a family do business, including the ethical standards everyone is expected to uphold. This is especially important should outsiders – such as your children’s spouses – join the business,” he says.
The succession plan will spell out what will happen to the business after you retire, or die. Who will own the business? And who will run it? Rossouw t says you need to consider the following:
“It should be clear that drawing up a succession plan is a very complex process. There is a multitude of facts and scenarios to consider. Also, although it is a strategy document, it will be supported by a number of legal documents, including your will and perhaps a trust deed. So besides involving your family, it is advisable to consult a team of experts beforehand, including your financial adviser, your accountant and your lawyer. And it needs to be updated on a regular basis to ensure it is still relevant to changing circumstances,” he concludes.
Modimolle-based Ina Lessing owns a business producing 166 000 bottles of fruit preserves and canned products to the value of R4.2 million per year, which are distributed all over South Africa. In May this year, she was crowned as the Sanlam/ Landbouweekblad Agricultural Woman Entrepreneur of the Year.
Lessing has five children, all of whom (including their spouses) are involved in some way in her business. With her own retirement in mind, she decided earlier this year to draw up a succession plan. “When they were growing up, my children were ashamed of my preserves,” she quips, “but today they are proud of what I’ve achieved. I was at one point thinking of selling my venture, but since the children are all now involved in various aspects of the business – from handling the marketing and distribution, to doing the books or just helping out now and again – I realised I have created a true family business that is a legacy to my children.”
Lessing has the following tips for drawing up a succession plan: