How 5 steps help create a workable family business succession plan How 5 steps help create a workable family business succession plan

By Michael Cadisch

EY Private Leader | Switzerland

He is Private Clients Leader for Law in Switzerland.

5 minute read 1 Feb 2021

Succession in family businesses is always an emotional matter. It is about handing over a life's work and preserving a family tradition. This is a challenge for all parties involved, including the Board of Directors.

Succession in family businesses usually occurs over a period of several years. It is a strategic project, which is implemented with the help of the Board of Directors. In practice, a structured process across a number of phases has proven its worth: Initialization, analysis of the actual situation, evaluation and preparation, as well as handover and completion. Emotional aspects due to the special relationship between the company and the entrepreneur family are a challenge for the participants and the consultants.

Phase 1: Initialization

In the initialization phase, the aspects of the company, the entrepreneur family and the financial feasibility already have to be taken into account. Within the context of the owner's strategy, the entrepreneur provides comprehensive clarity about the situation of the company, the family and the finances. Experience has shown that this process takes a long time and is initially contested by the entrepreneur "on their own". The will to implement it becomes all the more eruptive.

Phase 2: Analysis of the actual situation

In the actual analysis phase, succession in the company and in the family is discussed and the process to be carried through is planned in broad outlines and variants. All stakeholders must be included and the financial, organizational and personal objectives defined. Regular family conferences serve as an information platform. At this stage, the assignment of a project team with internal and external consultants is already recommended.

Phase 3: Evaluation

The evaluation phase involves developing several options for action on the basis of the wishes of the entrepreneur and the various stakeholders. Ideally, it is possible to aggregate the different demands into consistent, accepted and practically feasible options for action. In general, the aim is for talks to take place on an equal footing and for unconventional questions and the ideas of the younger generation to be allowed. Separate workshops help to enable the successor generation to express their wishes and fears in terms of their private and professional life.

Phase 4: Preparation

The preparation phase lays the foundation for the implementation of the chosen succession plan. Preparation includes the enabling of potential successors, the adaptation of company structures and the clarification of legal and tax issues. At this stage, you should clarify how non-operational successors are to be compensated and how the entrepreneur can manage the third stage of their life financially. Emotions must be allowed and misunderstandings must be cleared up so as not to jeopardize the operational solution.

Phase 5: Handover and completion

The handover phase begins as soon as the entrepreneur, the successor and the company are ready for it. In family businesses, the entrepreneur often remains with the company for a certain period of time. This may be desirable in the initial phase, especially for employees and customers. In such a case, however, it is essential for the benefit of the company and all those involved to make a clear separation of the responsibilities for management and design which the entrepreneur and the successor adhere to. The succession process is formally completed when the entrepreneur has relinquished all essential functions in the company.

The Board of Directors as coach and mediator

The complexity and importance of succession sometimes leads to frictions within one or between several stakeholders. Experience has shown that in the long term it is crucial for the success of the succession plan that conflicts are identified, addressed and resolved at an early stage. The (external) Board of Directors has an important role to play in handling and solving problems. As an often long-standing companion of the entrepreneur and company, its role is required as an independent and experienced coach and intermediary. In addition, it is effective in process support and the evaluation of possible successor options, as well as the search for and selection of possible successors.

Succession in the age of digitalization

Digitalization also affects family businesses. Although the importance of digitalization is recognized and there are generally solid foundations for internal processes and networking with customers and suppliers, the central challenge is the establishment of digital business models, which make a significant contribution to earnings. The size and often local rootedness of family businesses or the thinking within the different generations are no reason to reject the digital challenges. On the contrary: By cleverly exploiting existing IT opportunities, it quickly and cost-effectively creates functioning platform solutions that pay off for the customer and the company. Digitalization has only an indirect influence on succession. In general, the younger generation is more receptive to new technologies, which can lead to an older entrepreneur no longer wanting to face up to this new challenge and accelerating their willingness to hand over. Also in greater demand in family-owned companies are board members with a sufficiently broad affinity for the digital future and corresponding know-how. This needs to be checked and, if necessary, adapted for new appointments.


Succession is a strategic task for the company and the family. Make your contribution through forward-looking planning and control regarding effective implementation.

The willingness to succeed is the first prerequisite for a successful succession. In particular, the Board of Directors has an important role to play in coaching the company owner and resolving conflicts.

The company's suitability for handover is the second prerequisite for a successful succession. Base your decisions on this fact.

About this article

By Michael Cadisch

EY Private Leader | Switzerland

He is Private Clients Leader for Law in Switzerland.