Succession Planning for Family Business in Preparing The Next Generation

A wise man once said , if you fail to plan, you are planning to fail. There is no other proverb that pictures succession planning perfectly.

Though it’s vital to business’ success, succession planning is often underrated by family business practitioners.

In order to keep family-owned businesses running alive to the next generation, a significant and careful plan is required for the long run.

Having a comprehensive business succession plan will ensure continuity & smooth business’ transition to the next generation.

Succession may be a crucial stage and must be passed by each company in order to maintain their families.

This succession is a certainty, sooner or later every family company will experience.

What is succession planning, its advantages, and what you are able to do as family business leader/practitioner to maximize succession planning? Notice the solution below.

What is Succession Planning?

Succession planning is the process of planning towards the transition of leadership positions to the next generation.

The goal of succession planning is to confirm business continuity and growth, not to make the current leadership dispensable.

Succession plan is simply as necessary as a business plan, it consists of guidance for business owner and employee in running a business — this specific guide relates to the circumstances that occur if the current owner is no longer around.

Without succession planning, business’ fate becomes unsure. Besides, if a business owner has various family members, these kinds of things can create a conflict about who should take over the company.

One of the advantages of having a succession plan is keeping the family in peace and also sustainability of the business.

Read: Growing Your Family Business with SAP Business One

2 Types of Business Succession Plan

In general there are two types of succession plan; one to prepare business’ succession to the family's next generation and the other one to prepare business succession for the professionals. Furthermore, there is a difference between ownership and management succession.

Each type has a different approach. In this article, you will understand how to prepare management succession for a professional.

However, what are the differences, and how to prepare for both of them? Look forward to our next article!

Why It’s Important for Family Business

Most family-owned businesses desire a successful continuity of their business from one generation to the next.

Statistics prove that 70% of family-owned businesses globally are sold before the second generation gets a chance to take over and only 10% of family businesses survive till the third generation.

The transition of a business from one generation to the next is usually an arduous process, but it can be planned.

Too many things are at stake and the losses the family business has to face without succession can lead to a total chaos.

Succession plan helps you to identify who is qualified to fill and take the role.

In planning a succession for family business, you can consider family members that are capable of running the business.

HP is one of many companies that don't apply a succession  plan. This company has gone through several different CEOs. According to Market Realist, HP’s stock price has decreased by 16.25% since the beginning of 2015.


The company ignores the internal succession process. Instead of train the existing employees to take over, they replace CEOs with external hires.

On the other side, IBM managed to maintain the business.

Virginia Rometty made a smooth transition to CEO, thanks to an internal succession plan.

Virginia started her IBM career in 1981 as a systems engineer.

Since then she has controlled numerous leadership positions in IBM to IBM’s current chief operating officer.

Read: Is Your Business Ready for an ERP System? 5 Signs to Watch Out For

Here’s your go-to guide on how to get started. Follow these tips:

- Know who you are as a company

Company’s top management must begin with a clear idea of who your company really is to plan properly for its future.

Take a look at electric company Vs Tesla.

The electric supplier is a company that guarantees consistency and reliability, whereas Tesla focuses on hard-charging, best-in-class performance.

There’s no right or wrong – it means different types of companies needs different types of leadership.

By understanding “who” you really are, you can better identify the potential new leaders.

- Look at your entire organization

Observe each existing personnel to spot the key role and key worker.

The key is to take a look at every single employee and make sure you don't missed one single person or crucial position.

- Determine the succession planning strategy

To determine what will work best for your business, consider these 2 questions:

Does your company have particular vulnerabilities?

What’s your ultimate goal? What outcome are you hoping for?

- Identify your key employee

Once you’ve identified key positions, you need to find 2-3 employees who would make good successors for each of those critical roles.

This has to be seen from an objective point of view

Sometimes your strongest performers aren’t the most visible. That’s why you need to carefully consider every individual.

Read: ERP for Manufacturing – How ERP Can Improve Manufacturing Business


Whether you run a family company or not, the most important part of business succession planning is to name someone to take the reins after you are no longer there.

To protect the business from something bad and unwanted, it is critical to have a succession plan as soon as possible.

Many business owners do not have a solid succession plan, and when they are gone, their company often dies with them.

Just like the way you plan your retirement, it is also important to apply the same thing to your business.

To make an accurate decision for succession planning, you need an accurate integrated data in business. This data will be the point of reference towards the team or individual performance.

For the perfect integration of business operations, inventory, sales, and business accounting and financial records, you can use easy-to-use ERP software according to your business needs such as SAP B1.

By using this ERP software, your business can easily collect the data needed for succession planning as well as become a reference for accurate decision making.

Schedule a 45-minute-free consultation with TBI Senior Consultants to help your business grow with ERP.

Continue reading

Business Newsletter

Get great curated articles every week.

Curated articles on strategy, guides and tips on how to optimize the suitable technology to grow your business after this pandemic
No spam!

Grow your business rapidly with a streamlined operation.