Building a succession planning for Malta Family Businesses takes hard work, planning and an entrepreneurial mind set. Once a business has been able to maintain its success for a considerable time span, owners and/or executives have to embark on the succession planning task. Those businesses that consider themselves as being Family Business, face particular challenges in this area.
It is a fact that succession planning is a complex process as it has to deal with a multitude of scenarios and not solely those issues which are business issues. As such succession planning for Malta Family Businesses is more of an art than a science, by focusing on three critical areas, that is, developing of good communication processes, financial planning and compensation planning for the next generation., one can facilitate and improve the chances of success for your family moving to the next generation.
The succession planning for Malta Family Businesses process is made up of many interlinked actions but the process of planning for the next generation’s ownership and management can’t be done without serious, unfettered communication. Everyone who’s involved in the succession planning for Malta Family Businesses, whether he’s a current owner or a next generation family member, needs to be fully aware of what the future holds and how to get there. There is no template or “one-size-fits-all” succession planning for Malta Family Businesses process with a defined timeline and step-by-step instructions. Executing succession planning is best achieved when these are fluid and can be adapted to different variables (for example, the health of the parties involved, the commitment, objectives and intensions by the next generation, market conditions and expansion/diversity plans). However, no matter how the succession planning for Malta Family Businesses is structured or implemented, communication about the future is an integral part of the jigsaw in obtaining the full buy-in by the successors and developing trust between them and their predecessors. Communication can’t simply be around what the future holds, it must deal with what goes on today as well. It has to provide the linkages between the current and futures generations.
At the same time, the next generation needs to earn their way in the business on the basis of their own merits. This is achieved by providing feedback on positive performance and assisting with corrective action in areas where improvement is required. At the same time that the current owner/s is grooming a future leader/s, the communication process must also be a two-way process. Some of the major conflicts arising between the different generations in the business relates to the unwillingness of the current owners to accept new views and opinions put forward by the new generation. Due to the next generation lack of business experience it does not mean that they do not have valuable insights on today’s world and ideas on how to modernize or streamline an already successful business. It must be made certain that communication is something that family business members do not only accepts, but strongly encourages open and honest communication.
Once the next generation starts joining the family business, there will be the need to begin succession planning for Malta Family Businesses for their own financial future. There has to be a clear understanding and acceptance by the family on the type of package that the next generation will have so as to safeguard their own standard of living and subsequently their retirement. As many graduates now understand, the task of attaining financial security is something that takes time and great effort. It requires sound strategy and planning combined with willpower and execution. Joining a family business will not instantly grant financial security and a guaranteed lifelong well off package. However, it will provide benefits in the planning stages that many young adults aren’t normally offered. Mainly, access to company leadership and the ability to have a frank conversation about what their future and earnings potential may be.
When the next generation joins the family business, their goal is often for the next generation to eventually be in the driver’s seat. Succession planning for Malta Family Businesses should take into consideration their current and potential earnings, as well as the money that will come from their “inheritance.”
One of the easiest traps that a family business may fall into when setting up a succession planning for Malta Family Businesses is poorly structured compensation of the next generation of leaders as pay packages or owners through clearly defined dividend policies. When a family business has attained a certain level of success and the next generation has stated to be involved in the business, there is often the wish to start passing on the wealth to the next generation. Very often, the process starts by initially passing on the management and subsequently the wealth and other assets owned outside of the business. A family that has owned a successful business for a number of years has most likely also accumulated wealth outside of the business. This can be in the form of stocks and bonds, real estate, investments in other companies, collectibles or cash. When the next generation starts joining the business, the family has to refrain from falling into the trap of mixing the different income streams that income earned through employment and income earned as an owner. It’s tempting to combine that individual’s compensation for working in the business with his overall earned or anticipated “inheritance.” Separating both income streams is important and has to be clearly understood by all family members. Salary earned should be conducive to market going rates.
If for example the next generation joins the business in a marketing role immediately after completing school, they should be paid fair market compensation for an entry level marketing professional. By increasing their compensation to include some component of their “inheritance,” an inexperienced marketing professional will quickly rise to the compensation level of a seasoned executive. This will give the family member an inflated sense of his worth to the business and can dampen his drive to succeed and grow with the company. It is equally important to keep in mind the fact that it doesn’t teach the next generation about the value of hard work and earning their success. The wealth that current generation owners would transfer to the next generation, irrespective of the business itself, can be done in different forms. The family can transfer non-business assets via traditional methods using trusts and outright gifts that aren’t tied to performance in the business. By keeping the two sources of income separate, the groundwork is laid for teaching valuable financial lessons.
Succession planning for Malta Family Businesses is not an easy task and it is definitely not for the faint hearted. The process of succession planning for Malta Family Businesses brings along many challenges and it cannot be resolved overnight. Then again, neither did building the business that got to the point of needing a succession plan in the first place. A succession planning for Malta Family Businesses is something that is very specific to each business. There are various components that may work for one family business but not another. When constructing and implementing a succession planning for Malta Family Businesses, be mindful of keeping compensation separate from “inheritance,” assist the next generation with their financial planning and communicate every aspect of the plan to all the family. Keep communications channels open all the time and be ready to discuss very difficult and personal issues. If these are not sorted out at this stage these same issues will be the ones that will beget havoc in your family.