Family Succession As A Business Exit Strategy? Here's All You Need To Know About It.
Running a fashion business is a beautiful thing, but at times the business has to either be brought to an end or see its founder take a leave from business operations. The circumstances that surround business exit strategies for different businesses vary, but one thing is for sure, businesses either come to an end or move from one owner to the other after a while.
Previously, we have looked at Liquidation and Acquisition and Mergers as possible business exit strategies that might work for your fashion brand. This week, we take a look at Family Succession as a possible business exit strategy that might be great for your brand.
This business exit strategy, unlike others, does not require too much involvement of external parties in your exit strategy. It is also one of the simplest and most straightforward options when done right.
Since many entrepreneurs wish to keep their business in the family long term and preserve their name and legacy, this plan might just be the exit strategy they need. Unlike with liquidation, that most times happens against the will of the business owner, the family succession strategy requires deliberate planning right from the get-go of the fashion business to ensure it works out.
The family succession exit strategy involves transitioning the company to a child or another relative at a certain point. With this exit strategy, you, as a fashion entrepreneur, can groom successors over time to ensure they know all they need to effectively run the business when you are out of the picture, either partially or completely.
Although keeping the business in the family for multiple generations might seem like an attractive plan, you need to ensure that your family relationships can handle the stress and volatility of running a successful fashion business. You also need to be practical about whether or not a family member of yours is truly the best person for running the business.
However, if your family has been brought up with intimate knowledge and understanding of your business, they might be the best people to pass the business' reins on to. If you are seriously considering the business succession exit strategy, some of the things to look out for include ensuring that whoever you are grooming to take over the business has the relevant skill set required to run the business, is competent and reliable, and is committed to making sure the business succeeds in the long run.
Steps to Ensure Successful Family Succession
To ensure your family succession plan works out, you need to;
- Start Planning Early: Right from the start of your business, it is always advisable to have both business growth strategies and business exit strategies mapped out alongside your business plan. The longer you get to spend on succession planning, the smoother the transition process is likely to be.
- Involve Family Members in Discussions: Before you make the final decision on the candidates to groom to take over your fashion business, you should discuss with family members to know who is interested in being involved in the business. This will help you avoid causing strife and discord in the family on the sudden announcement of a successor.
- Be Realistic: You need to be realistic about who is capable of handling the business upon your departure. You need to examine the strengths and weaknesses of all possible successors as objectively as possible before making a decision.
- Do What is Best for the Business: Sometimes you might want all successors to have equal shares and control of the business but this might not work in the interest of the business in the long run. Always think of and consider what is best for the business before making any major decisions.
- Train Your Successor(s): You know the business more than anyone else and so you need to train all possible successors for the role. You need to teach them all they need to know about running the business, the values of the business and track their progress.
- Get Professional Help: Lawyers, accountants, financial advisers, and others can help you put together a successful succession plan. You might even want to enlist the help of companies that specialise in this to help you ensure the succession is smooth.
Advantages of Family Succession as an Exit Strategy
- You can choose and prepare your successor properly before exiting the business.
- You do not have to completely cut off from your business and might even get the opportunity to keep a hand in the business in an advisory capacity.
- It creates less disruption and is easier on your employees.
Disadvantages of Family Succession as an Exit Strategy
- None of your family members might be interested in taking over your business operations.
- The process may bring a lot of emotional, financial, and general stress to your family.
- Employees, business partners, and clients may not approve of the person you hand the business over to.