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Succession Planning Obstacles and Guidelines in Family Business

success_planningYou have to find the obstacles, then overcome them… fly over them, dig under them, outflank them to move around them. And it is often the ones that you didn’t see that cause you the biggest problems! Succession planning for family businesses is just like a physical obstacle course.

Every family and family business situation is different, so there is no one “master map,” because there are no fixed or defined obstructions. However, certain things do tend to appear frequently, so we’ve compiled our checklist of frequent obstacles. If you look for and deal with these, you will have greatly improved your chances for successful succession.

A couple of notes about this checklist…

  1. We have used “Dad” to identify a founder or retiring owner.
  2. The goal is not to determine whether particular obstacles are true or not…

… If the point is perceived to be true or present, then it is an obstacle that has to be dealt with.

Founder or Retiring Owner

  • First, and most importantly, Dad must believe his financial security is assured. Without this perception, there is a major obstacle and the probability of Dad leaving the business “voluntarily” is significantly reduced.
  • What is Dad going to do with the time and energy he had committed to the business? Obviously Dad must be able to envision a positive, productive, and meaningful existence away from the business. Without having something to “move to,” Dad likely will not “move from.”
  • Will the transition diminish Dad’s self-esteem and negatively impact his self-concept? Very often in our society, “who we are” is generally described by “what we do.”
  • With regard to the kids, the most perplexing problem for Dad is how can he be both fair and equal.

    As a parent, Dad’s instincts are to try and be equal to all his children. That is to say, he does not want to show any partiality to any one child. Yet, as a businessman, he knows the business can not be run well by a committee of his heirs. It is more logical to select one of the children to lead the company into the future. Both facets of this issue produce ample opportunities for Dad to procrastinate or to avoid dealing with the entire concept of succession planning.

  • Is the chosen successor ready and able to run the business? If so, how can that be proven?
  • The spousal relationship must be considered. Mom’s idea of retirement may not include “sailing a boat around the world.” In other words, even though the wife may not have had a visible role in the planning or the running of the business, she must be included in the planning for the transition to retirement if the process is to be successful.
  • Although it is not frequently discussed, Dad’s reservations about his fiduciary responsibility to long-term, non-family employees should be addressed. Who will look after them when Dad is no longer in the business?
  • Dad’s friends continue to work in their businesses or jobs.
  • Fear of death.
  • Reluctance to give up the power and sense of control.
  • Jealousy and/or rivalry toward successor.
  • Lack of coaching skills–tendency to focus on immediate problems that can be solved rather than “future” problems.


  • Spouse’s role in business.
  • Reluctance to discuss the future beyond their parents’ life.
  • Fairness versus favoritism.
  • Fear death of parent(s).


  • Personal relationship with the founder.
  • Differentiating among key managers.
  • Reluctance to establish formal controls.
  • Fear of change.

Outsiders – Customers, Suppliers

  • Clients or suppliers depend on the founder.
  • Clients or suppliers do not trust or have confidence in the potential successor(s).
Questions about Family Business?  The author, Don Schwerzler, is the world’s leading expert on family business.  You can ask him your questions here for free.

Success Planning Guidelines

Ideally, succession should be a process and not an event.  Start early and think about succession taking place over a three- to five-year period of time using these guidelines:

  1. Start the process by recognizing the goals and objectives of each of the family members and their spouses.
  2. Create an advisory board. It’s a great safety net for both the business and the family—especially if a catastrophic event occurs such as the unexpected death of the business owner.
  3. Pay attention to the “dualism dynamic.” As the management style of the business becomes more professional, the communication system for the family also should become more formalized.
  4. Plan. Lack of planning is a major contributor as to why only about 30 percent of family businesses successfully transition to the second generation.
  5. Engage the next generation of owners/managers by using their energy and education.
  6. Be flexible. Succession planning for a family business is generally described in terms of “transition.” It’s crucial to think of succession as a time of “transformation” for the business. Many family businesses are victims of the tyranny of routine, and they tend to make changes slowly.
  7. Be grateful. Succession time provides the opportunity for a family business to pass on wealth and wisdom.
  8. Succession is the time to review all of the policies and practices of how the business is managed and operated, review and assess equipment and technology, analyze and evaluate the customer base, analyze and evaluate the product line, determine how well organized the organization is, and evaluate human capital requirements.

About Don Schwerzler

Don Schwerzler is one of the world's leading family business experts. He is the founder of the Atlanta-based Family Business Institute and the Family Business Experts website; and has been featured in the Wall Street Journal. Don Schwerzler began his career as a family business consultant in 1967 and founded the Family Business Institute in the mid 80s. The Atlanta-based Family Business Institute is nationally recognized for pioneering the multi-disciplinary consulting protocol that has proven highly successful in dealing with the unique and complex problems that confront and confound families in business together. If you have any questions about family business, you can ask him here.

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