It’s imperative that succession planning begin years before it’s needed. If you leave it until the last minute, you’re likely to miss important details. And situations change – children may choose not to be part of the family business, divorce could change the family dynamics or a sudden illness or death may strike.

A hallmark of a plan prepared well in advance is that it gets updated a few times before being implemented, according to Caldwell Partners, an executive search firm.

Grooming the successor is an important part of making the plan work. The successor’s first experience carrying out the tasks associated with running the company shouldn’t be when he or she officially takes the reins. For months – or even years – before, this individual should shadow his or her predecessor, learning the ropes from the expert rather than muddling through alone, Caldwell Partners suggests.

In this year’s State of the Industry research, more than half of the respondents said they do not have a succession plan in place. The top two reasons for not yet having one were “not retiring anytime soon” and “no succession candidate.”

Handing over a family business to the next generation, especially the first succession, is make or break time for most family run businesses, says Christophe Bernard, a consultant at KPMG, a tax services firm.

“That’s why it’s imperative to approach this situation with forethought, and create a clear succession plan ahead of time that can be implemented when the time arises. It doesn’t matter how successful a family business is in one generation if it isn’t able to effectively transfer than momentum to the next generation,” he says. “Without a good succession plan in place, each time the business passes into the hands of the next generation, it could face failure, no matter how well it was doing previously.”

KPMG developed a three-step strategy to approach succession planning.

1. Review current goals and objectives

The best place to start is to take stock of what the current succession plan of the business is, and then move forward from there. Next, it’s important to take the plans, opinions and objectives of each party involved into consideration.

You need to assess the retirement plans of the outgoing generation, and then also evaluate the goals and interests of the new generation. It’s very important to establish early on if the goals, both personal and professional, of the next generation align with those of the business.

Along with assessing the people involved in the succession, this is the perfect opportunity to project future goals and objectives for the business itself. Once all these factors are considered, then the foundation for the succession plan are set.

Now is also a good time to bring in professional advisors to oversee and assist with the rest of the process of establishing your succession plan.

2. Document the succession plan

The succession plan should be written down, making it concrete, straightforward and not open to interpretation later. Ideally, it should also be inclusive enough to be adapted for future successions, and not just the immediate one.

The succession plan should include:

  • Who the successors will be – both for managerial positions, as well as the owners of the business.
  • Identify the new roles going forward for all active and non-active family members within the business.
  • Establish the support system that will be in place for the successor from family members as well as the company.

3. Create a plan for the transition

An important part of the succession plan is how the transition will take place between the current ownership and the new generation.

Establish within the succession plan how the business will be handed over – will the successor be expected to purchase the company, or will it be gift/bequest from the previous generation? If the company chooses to sell, what purchasing options will the older generation offer the successor?

A potential buy/sell agreement should be drawn up to be used in the succession, reflecting a fair appraisal of the value of the business, as well as ways to minimize the taxes involved in the transferring of the company ownership.

We’ve just started the process of succession planning, and we received some good advice. Prioritize your objectives. Prioritizing your objectives will help you choose your overall path and help design your exit plan. The three primary exit goals are financial security; transferring the business to a person or persons of our choice (employees, family member or other interested entity); and leaving the business when I want (could be never, in few years or immediately). — Alan Jones, president, Manor View Farms in Monkton, Md.

Lastly, the succession plan should outline a timeline for how the succession will take place.

Once the succession plan has been drawn up, then its contents must be communicated to the family, those active within the business, as well as non-active members. For the succession plan to be successful, and afford the company a seamless transition between generations, every family member must fully understand how the succession will work, and what their part is within it all.

Read more about succession planning and family business practices at

Succession planning is a systematic approach to building a leadership pipeline/talent pool to ensure leadership continuity; developing potential successors in ways that best fit their strengths; identifying the best candidates for categories of positions; and concentrating resources on the talent development process yielding a greater return on investment, according to The U.S. Office of Personnel Management. The OPM suggests considering developing a business plan based on long-term talent needs, not on position replacement; identifying talent with critical competencies from multiple levels—early in careers and often; as well as identifying development/learning strategies which includes coaching and mentoring, and shadowing.

Robert Half, a staffing company with several companies under its umbrella, established a step-by-step process for effective succession planning.

Be proactive. It can take time to find and prepare a promising candidate for a leadership role. Prepping someone to assume an important role creates an invaluable safety net.

Keep an open mind. While the obvious successor may be the second in command, don’t disregard other promising employees. Look for people who best display the skills necessary to thrive in the position regardless of their current title.

Make the vision known. Include potential managers in strategy conversations to help them acquire planning and leadership skills, as well as a broad vision of the organization and its objectives.

Offer regular feedback to protégés. When the employee nails a presentation or outperforms on a project, make note of it. Keep track of these achievements in a top-performer file so you have something to reference the next time a management position opens.

Provide training to peak performers. Help top performers develop new skills and refine existing ones. Remember that good leaders not only need technical acumen, but also strong soft skills, including standout verbal and written communication abilities, as well as tact and diplomacy.

Do a trial run. A vacation is a great time to have a potential successor step in to assume some responsibilities. They will gain experience while you learn how prepared the person is to take on a bigger role.