Many business owners dream of the day their son or daughter will follow in their footsteps and assume control of the family business, but they do not plan for the transition in sufficient time, nor do they prepare a transition plan with a clear and detailed strategy.

The owner has spent years, maybe even decades building a successful company. After all of that hard work, he or she is convinced that it should remain in the family. Business owners look at succession planning as a simple, if not natural progression. The reality is that even when it is kept in the family, the transfer process can still be very complex, and intertwined with unanticipated problems.

As a business intermediary – someone who sells a business on behalf of the owner – I see this type of "succession planning" frequently.

It is estimated that when a family business is transferred to the next generation that it fails to meet expectations of those involved close to 80% of the time. There are a number of reasons why:

• The owner underestimates the amount of “street smarts” experience they have accumulated throughout the years, and more importantly, underestimates the lack of experience the next generation possesses.
• The owner has run the business in a very hand-on manner and has not properly trained their children to become successors.
• The next generation isn't as motivated to make the necessary sacrifices that running a business demands.
• The next generation doesn't have the temperament suitable for business leadership.
• The next generation has obtained education outside the field of the family business and is trained for something else, such as a Doctor or Lawyer or Accountant.

Other family dynamics can also come into play. The retiring business owner may find it difficult to extract themselves from the business and may unintentionally sabotage juniors' efforts to assume control.

If more than one child is involved, you may find brothers and sisters battling among themselves for control of the business. Sibling rivalry can be particularly problematic if the control is not given to the most capable.

Partnerships have a life expectancy of 3 1/2 years. Putting two children in charge of the family business will most likely result in a partnership dispute. Often this leads to either the business failing or being sold to a third party.

None of these challenges need to be destructive. They are quite common. If planned for, ahead of time, transitioning a business to the next generation can be quite a pleasant and gratifying experience for all involved.

One of the tools available to ensure a smooth transition is psychological testing. This includes a series of interviews and tests that measure behavioral tendencies, motivational makeup and the cognitive ability of all key players. Both the older and younger generations are tested to assess skills, aptitude and motivation in a family transfer situation. The goal is to determine areas where extra support may be required. It is a constructive step toward managing the complexities of keeping things "in the family".

Another powerful tool is to create a transition plan over 3-5-7 years using an outside board of advisors to help ensure a successful transfer to the next generation. Once the potential trouble spots are identified, a plan can be put in place to address the various issues. The transition plan may include a management transition period, special training for the incoming owner and well defined roles for all of the family members involved.

The goal of a strategic succession plan is to ensure both the wellbeing of your loved ones, and the security of your retirement. To make the transition a successful one, develop a comprehensive plan and complete it, well in advance of the day you have targeted to begin your “life after business”.