Want a smooth family business transition? Embrace strategic planning.

4 min read

Succession planning is hard enough, but as a family business navigates the transition of leadership from one generation to the next, too many forget or forget an essential part of the process: the strategic plan. As suggested in an excellent article, Strategic vs Business Plan in Family Business Magazine (May/June 2023 issue) by Charlie Carr, there is often tremendous resistance of families to engage in a strategic plan.

A strategic plan is a long-term approach to the business — it helps anticipate both threats and opportunities to the business in the future and sets a longer-term strategy for dealing with all kinds of variables. But more than that, a strategic plan can and should be an integral part of succession planning—and in my opinion, is comparable to writing a will. Like a will, a strategic plan gives the outgoing leadership some control over what will become of their business after they leave it. The incoming leadership can also benefit by putting their stamp on the way the business will be handled going forward. With a strategic plan, family businesses can preserve their legacy while remaining relevant and profitable in the future.

As a family business consultant, I believe a strategic plan is essential for a successful transition, as it addresses some of the major issues that come up in succession planning. Here are some of the ways a strategic plan can help.

Memorialize the decision-making process.

Strategic planning helps memorialize how the current generation of leaders thinks and makes decisions. It captures the essence of their approach and documents the underlying principles and values ​​that have guided the business to success. This documentation provides not only valuable insight for the next generation but allows them to understand and embrace the thought process that has shaped the business’s success, rather than fighting against it.

Learn from the past.

While the next generation of leaders may be somewhat aware of past major decisions, they likely did not directly experience them. Strategic planning provides an opportunity to share the context and rationale behind these decisions — such as layoffs or budget cuts — and helps the next generation anticipate economic conditions and potential threats to the business. By understanding the strategies employed in the past, the new generation can successfully navigate similar challenges in the future.

Preserve legacy and manage threats.

Family businesses are often driven, in part, by a desire to preserve their legacy. And during a transition process, concern over legacy plays a big part in the fear that it can derail a successful transition. A good strategic plan can lessen or eliminate these fears, as it plays a crucial role in safeguarding this legacy by identifying potential threats to the business’s sustainability and developing strategies to mitigate them. By proactively addressing economic conditions, market shifts and competitive challenges, family businesses can position themselves to weather storms and remain profitable, thereby preserving their legacy for future generations.

Overcome resistance for a successful transition.

Overcoming resistance and fostering a culture of openness to change is the key to a successful transition. Strategic planning is a key driver in this process, as it encourages family members and stakeholders to prioritize long-term goals over short-term comfort. The process can give the outgoing generation a say in how things are going to work after they retire, and give the incoming leadership involvement in the strategic planning process so they become active participants and develop a sense of ownership and commitment to the business’s future success.

Stay relevant and profitable.

Perhaps most importantly, the strategic planning process helps ensure that the business remains relevant and profitable into the future. The business landscape is constantly evolving, and family businesses must adapt. Strategic planning allows family businesses to assess market trends, technological advancements and changing customer demands. It facilitates the identification of new opportunities and the development of strategies to capitalize on them. By embracing strategic planning, family businesses can position themselves as agile and forward-thinking entities, ready to thrive in an ever-changing business environment.

Successful successions, and successful businesses need a strategic plan. And it’s a good idea to integrate strategic planning within the framework of a succession plan. By embracing strategic planning, family businesses can strengthen their foundation, drive sustainable growth and ensure a smooth transfer of leadership to the next generation.

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