Retiring and letting go is one of the most emotional experiences a CEO or MD will do in his/her lifetime having built a family business up over many years. Running a successful family business is such a wonderful intense experience that the business may seem like a beloved child to the CEO/MD.
Some CEOs never retire and some only semi-retire. What are your plans? Have you considered your retirement? It’s one of the most critical stages of your business and calls for careful planning.
“Letting go” means relinquishing control and leadership of a family business.
Every entrepreneur is different and chooses their own path. Some are forced to go due to ill health, others are pushed by board members or by other circumstances.
Whatever path you choose you must do it responsibly. Time and market waits for no man. It’s important to ensure the business focuses on the needs of its customers or clients and business owners need to be responsible both to their family and the business when their time has passed.
The CEO preparation for retirement is vital and equips you mentally and emotionally for the years ahead. It is important to remember that your family business and you personally are separate entities. Planning your retirement is easy when you have chosen a leader to succeed you and the leader is prepared but that very often is not the case.
If you choose to stay, be aware that staying on could mean that you are depriving your heirs from growing and developing in their roles. In the family business, do you want these members of your family who work in the business to feel as if they have simply a job and are not the owner? Sometimes it’s vital for the founder to remain in the business for a set period of time after the heir takes the reins in order for a smooth transition.
Preparation of the new CEO
One of the most important tasks of any CEO is to choose a leader and prepare that leader to take over the family business. Failure to adequately prepare the leader means that a successful transition to the next generation is starting from a difficult position.
If you don’t plan to retire then it is very important to communicate that to your family so that they know where they stand and allowing them the opportunity to discuss the matter with you. Be warned though that the danger of hanging on are that your children who work in the business get bored and disillusioned. They may even become resentful that they aren’t given an opportunity and the business may begin to suffer as the younger generation are likely to be more in touch with changes in technology, attitude and new markets.
Entrepreneurs have to self-question why they are hanging on. Is it because of financial reasons, or that the next generation aren’t ready (is that their fault or should it have been addressed earlier) or is it that there is nothing to retire to. It is worth noting that in public quoted companies that CEOs don’t usually have the option to stay on rather company policy dictates the age that they need to retire.
Other nagging fears
In addressing the decision to retire other fears loom. Am I going to have enough to retire on? Will the family get on post my departure and the fear of mortality.
These are natural feelings and appropriate to the change in life that is happening. It’s important the entrepreneurs are generous to themselves and have a pension pot that’s independent of the business.
If there is not adequate financial provision for retirement then apart from shares been gifted to family you may consider selling outside the family.
Entrepreneurs like to control things and unfortunately some things are outside their control like ensuring that the family get long post retirement however, with good planning a shareholders agreement including a dispute resolution mechanism can be put in place to safeguard against this.
My advice is talk to an independent professional in confidence and put a plan in place now to ensure a careful measured transition.