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Why is a succession plan important for family businesses?

On Behalf of | Aug 28, 2020 | Estate Planning

In a family business, one of the most difficult challenges that CEOs face is choosing the successor CEO. A good successor will have the knowledge and experience in the industry deemed necessary to work as CEO. Likewise, you cannot understate his or her abilities as a leader. If he or she cannot lead the business, then it is not a good fit. 

If you do not plan early and if you do not have a succession plan in mind for your business, you could run into several obstacles, suggests Forbes. 

A struggle for power

If you do not have a successor in mind and something happens to you, you may create a power vacuum. There may be siblings and other family members prepare to fight for the position. This type of power struggle can seriously harm your business. It creates an uncertain environment. Due to this, employees may not feel safe. 

A fight over wages and authority

In a family business, it is not uncommon for other members of the family to complain about wages and authority. Sometimes, CEOs make the mistake of paying employees based on emotion, rather than merit. When choosing a successor, ensure that the successor will have a board that will help him or her establish wages. This is the same board that should help you to choose your successor. Even in a family business, it is important to remain fair. When you base your decisions on your love for family, you can wind up stirring arguments not only between family members but between employees of your company.