Recently we wrote about the long odds of succession in family-owned construction firms. Basically, there is a 1 in 10 chance of a family-owned or closely held construction firm staying within the family until the 3rd generation takes over. Those are long odds, and a successful transition will not happen without some mindful planning work and the willingness of each generation to enable a hand-off to the next generation.
The elephant in the room is that many first or second generation owners don’t want to talk about succession whether within the family, inside the firm or even with other owners.
That is especially the case during lean times in the economy like we have had over the last 4 or 5 years.
The focus has been on getting business, keeping the team on board and productive, getting paid and keeping the business alive. Without accomplishing those things, any succession conversations are just idle talk.
Sometimes the current owner is getting older and the younger generation either hasn’t been prepared to take over or they might not be as passionate to run the firm as their father or grandfather might have been. Another thing that happens is that people, most likely men, who own and run these family-owned businesses have strong, no-BS personalities and they might not even entertain succession conversations. Quite simply, in succession planning that toughness can become a negative if not recognized and controlled.
There are many dimensions to the succession process. Several writers have suggested points for consideration during the process. One of them is Mike Wolf, co-founder of French Wolf & Farr, an Atlanta-based investment advisory firm. His article entitled Success in Succession Planning in the December issue of Construction Executive outlines some of the key considerations that owners and their advisors should consider when they decide to embark on a succession plan for their company.
Clearly if you are in a position to consider generational succession for your firm whether you are the principal, a next generation potential owner or a high potential employee interested in buying the firm, it is imperative that you recognize the elephant of succession planning and ask the questions that will put you into the 10% of multigenerational firms that will be successful in the transition of both ownership and leadership for the future.