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Succession Planning in a Family Business: What to Consider


By Mark Shone, CFP®

When it comes to succession planning in a family business, perhaps nothing sums up the pitfalls better than a proverb attributed to Andrew Carnegie: shirtsleeves to shirtsleeves in three generations.

As bleak as the suggestion might be that family wealth will never reach the great-grandchildren stage, it is a data-supported truth. According to NASDAQ, 70% of families lose their wealth by the second generation. Furthermore, 90% of families have lost their wealth by the third.

To financial planners and analysts, this isn’t a surprise. While succession planning is often talked about regularly, it is rarely executed well.

When we talk about succession planning, we’re talking about the change of ownership and leadership of a business when the head of the business retires, becomes incapable, or passes away.

An unexpected illness or death can throw a business into chaos. While a lot of succession planning rightfully focuses on what to do in the event of a retirement, it’s crucial to consider succession planning as an overall continuity plan for the business and family wealth.

Establishing Governance

One of the keys to successful succession planning is establishing governance structure early on. This provides a process by which you can make decisions and communicate clearly and effectively across the family. The structure will also help you to see any potential issues that could arise and prevent disputes down the line.

A governance structure should include statements of values, communication and meeting schedules, a family council of decision-makers, policies for employment, ownership, and liquidity. It also behooves the savvy business owner to introduce a succession plan that includes educating the next-generation leadership on the business they will one day run.

Many of these elements are often to be “added later” and more often than not are forgotten. Yet without a comprehensive outline of how the company should be governed by the family, the family legacy may be lost in a haze of miscommunication and disagreements.

The Three C’s of Succession Planning

It’s impossible to overemphasize: there is no such thing as a one-size-fits-all solution for succession planning. Just as every business is unique, so is every family. In fact, it’s often wise to employ a third party to ensure that every eventuality has been considered.

Not every family member is going to have the interest or ability to participate in the business’s day-to-day running. Therefore, it’s vital to ensure that every family member has been approached and is permitted to put forward their point of view in the beginning to ensure equality of representation.

Ultimately, strong governance should set the foundations for how the family discusses business, both now and in the future.

The roots of effective governance are consensus, communication, and consistency.


It’s important to highlight the business’s shared values and where it may go in the future. There should be a solid understanding of who will be in charge, what the process for handover looks like, and agreement within the workplace. The succession planning stage is an appropriate time to highlight the training and education necessary for family members who are to be considered for leadership.


All stakeholders should be invited to participate and be allowed to talk freely. It also is vital in the course of communication to ask questions and establish answers. Assumptions, in this case, can lead to preventable squabbling further down the line. That being said, communication isn’t a one-time thing, and regular meetings should also be incorporated into the business’s future.


Once this process is established, it should be consistently followed. This is an excellent way to ensure that the business process remains healthy and that core values and expectations are passed down to future generations.

Succession Planning as a Process

Succession planning can be seen as a way to celebrate and move forward with a family business by establishing a robust governance structure. It also allows for the process of review, should circumstances within the family change.

Increasing family member engagement and aligning priorities limits the possibility of professional disagreements spilling into family life. Understanding the process will also enable next-generation leadership to envision how to proceed in the future while respecting the business’s past.

Ready to start creating a succession plan for your family business? Contact the Shone Wealth Management Team today.

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