Drawing on his long-standing presence in the Latin American banking sector, Julio M. Herrera Velutini is the chairman of an international bank based in Puerto Rico. A 10th-generation banker and family business owner, Julio Herrera Velutini has successfully transitioned the family’s banking business from his father before him into the 21st century.
Family businesses have some of the worst transition report cards in the business world. Only 30 percent of family businesses successfully transition to the second generation, and only 12 percent are passed to the third generation. Part of the problem is poor succession planning. Here are a number of mistakes many family businesses make:
i) Putting off succession planning
Many business owners have the mistaken belief that a business has to have clocked a significant number of years before they can begin considering a succession plan. This is misleading. It’s never too early to have a succession plan. In fact, a well-structured succession plan can take years to construct. So the earlier a business owner starts, the better.
ii) Not formalizing the plan
A recent PWC survey revealed that while half of business owners claimed to have a succession plan, only 16 percent had documented their plan and discussed it with stakeholders. Good succession planning should involve family discussions. This will expose potential conflict areas early enough and open up channels for successful mitigation of these problems. Single-handedly deciding a succession plan will surely bring family disagreements.
iii) Failing to consider the company’s vision
Business owners should ask themselves where they want to see the company in 10 years and what a successful transition will look like. Afterward, they should find a way to integrate the business’ goals into the transition process, creating clarity and consistency in the company’s mission beyond their own generation.