In order to maximise the chances of success for a transfer and to sustain the company, particular attention must be paid to the preparation of the transfer. It must be carried out with help from a transfer professional such as ACTORIA.
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One of the particular things associated with family businesses, which can prove to be problematic with regards to a transfer, is that the director has all of the decision making power. Their central role must therefore be progressively reduced so that the organisation, with a director at the centre of everything, can give way to a more balanced organisation. Organisational preparation and adaptation of the company’s structure are essential.
The company is, before anything, a collection of people and values. As opposed to a company sale, the employees must play an essential role in the transfer and must be the first to know the director’s wish to transfer the company to a family member. Employees know a lot about how the company’s savoir-faire and values; they can make the changeover much easier.
The company is in constant contact with many economic actors: clients, suppliers, bankers, investors … These different partners trust the company and the director. It is therefore necessary not to break this relationship and to introduce the future director as quickly as possible in order to reassure them: honesty is essential.
It is equally important to evaluate the company’s capacities, to work out its profits and the future growth so that the family transfer does not become the source of problems within the family, which can unfortunately sometimes be the case. If the company experiences difficulties, it is best to re-establish a good situation, which will help the takeover to be a success. Timing of the succession is therefore important.
It can sometimes be attractive to transfer private assets, which belong to the company, but are not used by the business, before the transfer.
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The decision to transfer the company to a family member is not one that the director should make on their own. The buyer must evaluate their motivation and capacity to direct the family company. This can seem a little insignificant but many company directors aspire to transfer their business, which often represents a lifetime’s worth of hard work, to a family member, even if they do not want to or do not have the ambition or skills.
The director’s exit: The succession generally does not take place without a certain amount of upset: there will always be an indescribable link between the company and its former director, who dedicated most of their time to the company. They must therefore psychologically prepare themselves to progressively leave the company, which they were once in charge of. Free time will seem to them to be empty time, which may frighten them! It is therefore necessary to prepare their ‘redeployment’, which will be devoted to family life, another business or to relaxation. It is therefore essential to plan a progressive exit for the director so that they can detach themselves from the company and focus on something else.
However, planning their departure represents another considerable issue. The company must continue to work. Indeed, the company can become unsettled if the schedule for the director’s departure is not strictly followed. The management must be united in what they do. The buyer must be able to quickly communicate their plans and the company must be able to accept that the company has a new director. The buyer’s credibility can be easily marred at the beginning of a succession if the director’s departure is not effectively carried out.
The changeover: The future director must psychologically and technically prepare for new responsibilities, which they will acquire. It may be advisable that the buyer take specific training and learn how the company works. It is often a very positive thing for the future director to have experience outside of the family company; their vision and experience will profit a lot from this. A good knowledge of different management roles is equally important.
Planning and preparation are essential stages, many successions fail because of poor management during this period. The entrepreneur must be totally clear about all information, which could influence the company’s future
It is important to prepare this as early as possible, not to rush and to plan at least 2-5 years before the changeover in management.