Succession: the action or process of inheriting a title, office or property
Succession means different things to different people.
For some, it may mean passing down the family business on to the next generation to spend more time with grandchildren.
For others, it may represent the opportunity to cash out of their business and relax on an island sipping pina coladas.
We are currently experiencing the biggest generational wealth transfer in Australia’s history. PwC estimates that $4 trillion is projected to be transferred between generations over the next 20 years.
With this in mind, it is easy to assume that the succession planning equation must always involve a baby boomer looking to retire to play golf or care for their grandchildren.
However, I was recently alerted to what I am choosing to label “succession planning bias”.
At a conference I attended recently, a speaker was discussing how the concept of succession planning should not always be associated with, or dictated by, age. It got me thinking.
What does age have to do with succession planning? How often have I come across young founders pushing hard for an early exit to set their family up? Or conversely, older founders who are just getting started on a new venture with no immediate plans to step back?
Although age may drive some motivations, shouldn’t succession planning come down to a combination of individual shareholders’ personal and professional aspirations?
These aspirations differ from shareholder to shareholder and are constantly evolving however, some of the more common succession trigger events tend to be one or a combination of the below:
- Shareholders wishing to transition away from the day to day running of the business to spend more time with family (e.g moving from a CEO role to a board member)
- Shareholders wishing to create a wealth realisation event (where a family may have much of their wealth tied up in the business)
- Shareholders wishing to bring on a capital partner to help accelerate growth (such as private equity or venture capital)
All of the above involve the process of somebody external to the existing shareholders “inheriting” titles, offices and property.
It is important to remember that this can be achieved either via a full or partial exit and over a staggered period of time.
At Pemba, we often meet with founders who are considering their succession options and the role an experienced growth partner like Pemba could play to help facilitate this process.
So remember, be conscious of “succession bias” – succession should be part of every company’s plan and need not be dictated by age.
If you are interested in learning more about how Pemba partners with founders, please contact me at firstname.lastname@example.org