Planning your business succession: a roadmap for the handover

When does succession really begin?

It starts the moment two generations hold different views of the future and both believe they're right. The day of the handover comes long after that. One business owner put it exactly this way on our podcast: two generations meet with different views, different experiences and therefore different knowledge about the future. Neither side really knows what's coming. Both act as if they do.

It starts with the first conversation about what the owner wants to do after the handover. Not with the search for a successor, and not with the appointment at the tax advisor's office.

The reason is practical. An owner with no picture of what life looks like without the company will postpone every decision that leads to the handover. From the outside, that looks like a lack of opportunity. From the inside, it's an open question nobody has asked.

Five to ten years is a realistic time frame. That sounds long, and it isn't: two to three years go into getting clear, building the second tier of leadership takes its own time, and after that comes a phase in which old and new lead together. Start with a two-year runway and you can still sell or transfer. What you can no longer do is shape the outcome.

Which three questions come before any structuring?

The order is the real point of this article. It almost always gets reversed, because the third question is the most concrete one and therefore gets tackled first.

The last row is the punchline. Tax and legal structuring is a craft, and there are specialists for it. It only gets difficult when it's expected to substitute for decisions nobody has made.

Family, outside management or sale: what decides it?

The question of who can and wants to carry the strategy of the coming years. All three paths work, but they place different demands on you.

• Within the family works when the next generation genuinely wants the job and grows into it professionally. The most common mistake is a yes out of a sense of duty. It doesn't survive the first difficult stretch, and then it costs you the company and the family at the same time.
• Outside management with shares staying in the family separates ownership from leadership. That requires an owner family capable of playing the owner role, meaning oversight instead of day-to-day business. Keep governing anyway and you'll have a managing director who doesn't lead.
• A sale is the cleanest solution and the one that requires the most groundwork. A company that doesn't function without its owner is hard to sell. That's exactly what the years before the handover are for.

In practice, hybrid models emerge: a family member takes on one part, an external managing director the other, or a minority shareholder joins. Models like these need a written division of responsibilities, because otherwise, when in doubt, whatever has applied for the past twenty years will apply.

What makes a company ready for handover?

The answer is uncomfortable: everything that currently depends on the owner. Readiness for handover isn't a condition of the balance sheet, it's a property of the organization.

• Customer relationships that belong to the company. If your three largest customers call the owner and know nobody else, the value of the company drops when the owner leaves. You can change that in two years by sending other people into those conversations.
• Decisions that get made without the owner. An approval limit that routes every investment over €5,000 to a single desk makes the handover impossible. Raise the limits and see what happens: that's the practical test.
• Knowledge that is written down. Pricing logic, supplier terms, the reasons behind special arrangements with customers. Much of it is documented nowhere, and it walks out the door with the owner.
• Numbers somebody can explain. A buyer or a bank will ask for contribution margins by product group. If you have to put those together during the process, you're negotiating from the weaker position.

These four points are also the work that makes the company better regardless of succession. That's why it pays off even if the handover ends up looking different than planned.

How does the handover itself work, without two people in charge?

With a date, and with responsibilities that change on that date. A transition phase makes sense; an open-ended one is the most common reason successions fail.

A three-step split has proven itself. In the first, the successor takes full charge of individual areas while the owner runs the rest. In the second, the successor runs the company and the owner is available, but without authority to give directions. In the third, the owner is a shareholder or nothing at all.

What derails this phase is availability without limits. When employees keep checking with the former owner and get a different answer there, a second power center forms within a few weeks. The only remedy is a clear statement to everyone about who decides now, and a former owner who visibly passes questions on to the successor.

For the successor, the opposite discipline applies: the first hundred days are no time for a new strategy. Anyone who starts restructuring right away loses the people who are supposed to carry the transition.

The external announcement deserves its own care. Customers and suppliers should hear about the handover from you, in an order that follows importance: the ten largest customers in person, the rest in writing, the workforce before anyone else. Leave it to the grapevine and you'll spend the next few months negotiating rumors instead of orders. One sentence covers the substance: who is taking over, from when, and what stays the same for the customer.

Which mistakes cost the most time?

The most expensive one is the owner who won't let go and doesn't notice it himself. In a conversation on our podcast, a consultant describes a family business where the strategy process was supposed to start and the senior boss simply didn't show up in the room. On the phone he said: when it comes to strategy here, none of you has any say. Sentences like that don't just appear in anecdotes from the eighties, they're said today.

Three. All three come from the same intention: avoiding conflict.

• One-on-one conversations instead of a joint session. When every family member is heard individually, different expectations form that later collide. A joint meeting is more uncomfortable and faster.
• A date without a decision. "I'll stop at 67" is an intention. A decision names the date, the successor and the steps leading up to it. Intentions get postponed, decisions don't.
• Valuation before strategy. A valuation extrapolates the past. If a decided strategy is on the table, the family negotiates over a plan instead of a projection.

Avoid these three and you've handled the largest part of the succession before the first contract is drafted. The rest is craft work for specialists.