How family businesses can harness succession as a driver of continuity and growth

Succession is the single biggest test a family business will ever face — and one of its greatest opportunities. For a family business, transition is about much more than transferring leadership or ownership from one generation to the next. It is a defining moment for the family and the enterprise — a juncture that can shape relationships, preserve or reinvent a legacy, and influence the future direction of the business for years to come.

When transition is not planned and carried out thoughtfully, what is at risk extends well beyond business continuity. Years of innovation, competitive advantage, hard-won trust, strong values and relationships with employees and communities can be disrupted. Within the family, unresolved questions about strategy, ownership, leadership and control can create tension at precisely the moment when alignment matters most.

But transition also creates opportunity. Done well, it can be a catalyst for families to clarify what they want to preserve, what they are prepared to change, and how the next generation can contribute to the future of both the family and the enterprise — unlocking fresh thinking and new sources of value in the process.

Tellingly, all transitions — successful or otherwise — stand or fall by whether they're approached with the right shared expectations and proper planning. But these attributes may be getting harder to achieve. Succession is being made more complex by rising longevity — often resulting in higher numbers of family stakeholders when the transition comes — and an upcoming generation whose values, expectations, experiences and life priorities can differ dramatically from those of the incumbents.

However, as well as posing challenges, these generational shifts can also be leveraged to families' advantage, by infusing fresh perspectives and potentially opening up previously untapped opportunities for entrepreneurship, innovation and value creation. In a changing world, the traditional formulae for succession success that worked in the past might not serve families so well today. Put simply, it's time for new thinking and approaches — ones that treat succession not just as a risk to be managed, but as a strategic opportunity to be harnessed.

In this article, we draw on the experiences and insights of some of our most seasoned family business practitioners to explore the attributes that separate those family businesses that thrive through transitions from those that don't. We hope you find it informative and thought-provoking.

Every family is unique, making every generational transition unique too. The broad approaches to it can also vary across the world, sometimes reflecting differences in tax rules or cultural norms: in some countries it's perceived as primarily a matter of estate and tax planning and asset transfer, while in others it's mainly about who's going to run the company post-transition.

However, in every case it's a multifaceted process, often involving separate but interrelated issues spanning ownership, leadership, governance, next generation readiness and education, voting rights, board membership and more.

These considerations are overlaid on the shared family purpose and values, as well as on differing generational agendas. The way these play out also impacts non-family managers and employees, raising risks of disruption for the business itself.

It's widely accepted that succession planning can be invariably complex and difficult. But experience consistently shows that the hardest part is dealing with the human aspects. This is because the biggest barriers to good succession planning usually centre more on emotion and relationships within the family than on business, technical or tax issues.

Family conversations about succession can be awkward, with family members often feeling uncomfortable raising issues related to ageing, death and money. One reason that many families shy away from discussing succession, even terming it the 'S-word' in some cases, is that it brings overtones of facing up to mortality.

Also, family members of all ages often assume they know what the others want without discussing it with them, leading to misunderstandings and misaligned expectations. One-to-one conversations with an independent third party can frequently elicit views that surprise other family members, across areas as fundamental as the ownership and management of the business, and the roles they see themselves taking within it.

A further complicating factor is that the barriers to a smooth transition vary between different generational transitions. Many first-gen founders are single-minded, entrepreneurial owner-managers who are fiercely protective of their 'baby' and find it difficult to cede control, especially if they feel the NextGen family members are not up to the task. This can result in nothing being done to get ready for the transition, meaning NextGens who could have been developed for ownership and leadership may be underprepared when the time comes.

Even when founders are sufficiently confident to choose a NextGen family member they feel is suited to taking over, they're often reluctant to tell the other NextGens about the choice in case they feel they've been passed over. While this reticence on the part of the incumbent is aimed at avoiding family friction, it can end up making it worse.

After the first-gen succession, subsequent generational transitions are different again. By that stage, the business may well be larger and better established, and there will probably be more family members — maybe a 'cousin consortium' — with an interest in the company. Depending on the age of the incumbent owner or owners, there may be the possibility of skipping a generation and having the grandchildren take over. Considerations like these can make the process feel even more complicated and daunting, and lead to it being left in the 'too difficult' tray.

Yet these same pressure points — differing generational values, questions of control, competing priorities — are also exactly where the opportunity lies. Families who work through them deliberately, rather than avoiding them, often emerge with clearer governance, stronger alignment, and a sharper sense of strategic direction than before.

A poorly managed transition can sow chaos both in the family and the business. Unresolved conflicts over ownership, control and the future direction of the business can irrevocably divide families and, in some cases, lead to prolonged legal disputes. What's more, the resulting disruptions directly impact the business itself, especially where the warring parties are on the board or have executive roles, with important decisions being blocked or delayed.

A further effect is that non-family executives and staff seeing family members at loggerheads might lose confidence in the direction and future of the business, resulting in talent being lost or deterred from joining. Confidence also suffers among external stakeholders, impacting the business's reputation among customers, suppliers and wider society, and potentially causing lenders to recall loans.

The good news is that virtually all of this is avoidable. Every risk described above traces back to the same root cause: a lack of early, honest preparation. Which means every one of these downsides can be converted into an upside simply by starting the conversation sooner.

Given the layers of technical complexity and human emotion involved in the transition to the next generation, what do the families who handle it well do right? Here are five principles for navigating a successful succession — and using it as a launchpad for growth.

1. Build mutual trust and set expectations.

Achieve clarity on what matters to all family stakeholders — including shared values and purpose. To create the conditions for a smooth transition, it's important to engage all family stakeholders in open discussion around values, purpose and objectives, both for the family and for the future of the business. The priorities are likely to range from realising the value of the asset to maintaining control of the company, supporting the continued success of the business, and preserving the family and business legacy.

Achieving this clarity requires open discussion of some sensitive and potentially awkward issues that may have been avoided in the past. A trusted external adviser can play a valuable role here by engaging personally with every family member to establish what they really want and expect from the transition. This helps to enable succession planning decision or outcomes to reflect — as far as possible — the stakeholders' own personal agendas and promotes collective family harmony. Done well, these conversations often surface entrepreneurial ambitions within the next generation that might otherwise have gone untapped.

2. Take a holistic view of the transition.

Span all aspects, interests and family voices. Effective succession planning needs to take into account a wide range of issues spanning leadership, ownership, decision-making, governance, capability, family relationships and more. Throughout, it's important to take a holistic view, treating business ownership and management as separate yet related topics while taking heed of all the diverse family voices with an interest in the outcome.

Some families opt to develop a family charter setting a framework for decision-making on family issues. While this can be a useful step, it comes with two caveats. First, a family charter defines how decisions are made, but doesn't guarantee everyone will agree with them. Second, as both the family and the external business environment continue to evolve, a family charter that is left gathering dust in a drawer rather than being regularly reviewed and updated will soon become obsolete.

3. Actively develop the next generation's business capability and ownership readiness.

There have been occasions where the next generation have inherited their family business without the leadership or business skills they'll need to sustain and grow it. While the next generation may not always be ready to step in directly, particularly in the event of an unexpected transition, appropriate succession arrangements should be in place to provide continuity until they are ready, whether through other family members, trusted representatives or professional leadership.

While the approach to developing the next generation as owners and leaders will differ with every individual and family, all younger members have opportunities to learn vital skills and capabilities — and build useful relationships — in many ways and environments. These include working in the family business or other established businesses; launching and running their own entrepreneurial ventures; gaining academic qualifications, such as an MBA; or participating in tailored development programmes.

Whether they're going to be a passive major shareholder or an active day-to-day manager and operator, members of the next generation are future owners of the family business. So the goal of the development activities should be to instil an ownership mindset and readiness in line with the family's purpose and values, underpinned by the skills and capabilities to lead the business forward. This is often where the real growth dividend of succession shows up: NextGens bring fresh perspectives, new networks and different risk appetites that can open the door to innovation, diversification or expansion that the business might not otherwise have pursued.

4. Carefully weigh up the spectrum of options, from family succession to outright sale.

When a family business is approaching a transition, the possibilities range from family succession of both ownership and leadership at one extreme to outright sale to a third party at the other. There are also myriad options in between, such as transitioning ownership while bringing in professional management to run day-to-day operations.

While there's no one-size-fits-all solution, one of the available approaches will always be right for both the business and the continued harmony of the family. As ever, this will be determined by what the family actually wants. A distinction that sometimes arises is between being a 'family business' that remains consistently in family hands, and a 'business family' that sells some or all of its operating business to invest in a range of commercial, philanthropic and social ventures.

When it comes to considering an outright sale, some families may be tempted to sell because they can't see a viable successor in the next generation, or because they want to save their children from the rigours of owning or running the business.

While it's always possible a family might receive an offer that's simply too good to refuse, it's important to see a sale as just one option on the table. Deciding to sell because you feel you're stuck in a corner and have no other choice is unlikely to be the optimal course of action. So owners should slow down the conversation, step back, and take pains to understand what type of transition best contributes to the purpose, values, legacy and wellbeing of the family — NextGens included.

5. Keep on preparing continuously: succession isn't a one-off event, but a journey.

While timescales vary, successful transition planning usually takes years of painstaking preparation and discussion with family members, advisers and other stakeholders. This means it requires patience from all parties, since the apparently slow progress can create frustration among some family members, especially younger ones. It also makes it important that families never take their eye off the ball: the next transition is always on the horizon, and could arrive sooner than expected.

To maintain focus, it's a good idea to keep end-goals in view that reflect the family's purpose, values and goals, and to set clear milestones along the journey towards them to show the momentum and direction are being maintained. It's down to each family whether it decides to communicate publicly the succession plans it has agreed. Business-owning families usually keep a relatively low profile, letting their businesses do the talking. But recent headlines over the succession planning for some major family-owned businesses suggest that more openness might help to ward off some intrusive media coverage and help control their narrative.

Treated this way, succession planning becomes less of a recurring hurdle and more of a standing capability — one that leaves the family consistently well positioned to act on new opportunities, whether that's a generational handover, an acquisition, or a shift in strategic direction.

Having trusted advisers with intimate knowledge of the family and its business brings many benefits. Here are three of the biggest:

First, they act as a sounding board for different ideas, approaches and perspectives, informed by close engagement with family members from all generations and family groupings.

Second, they provide valuable insight from their experience of how other families facing similar situations have handled them, and the resulting outcomes. In short, they know what has worked elsewhere, both for families and the businesses they own.

Third, their advice is underpinned by detailed understanding of the external context including tax risks and opportunities, multi-country regulation, market conditions, and many other technical aspects.

Above all, the right adviser is a partner by your side every step of the way along the journey of life and succession: a calm voice even when emotions are running high, dedicated to helping to chart the best way forward for you and your family.

The most successful transitions rarely begin at the moment leadership or ownership changes hands. By then, much of the important work should already have been done.

The family has had the difficult conversations. Expectations and priorities have been surfaced.

The next generation understands both the opportunities and responsibilities of ownership.

Governance and decision-making structures are in place, and the business has the leadership and capabilities it needs for the future.

That does not mean everyone will always agree. Successful transition is not about eliminating differences; it is about creating the trust, clarity and structures that allow families to navigate them constructively.

When that groundwork has been laid, the transition itself can feel almost uneventful. There are fewer surprises, stakeholders understand what is changing and why, and the family and the business are prepared for what comes next.

Ultimately, success is not simply passing a business from one generation to another. Done well, succession is not just a transfer of what already exists — it is one of the most powerful, underused levers a family business has to reinvent itself and grow. It is leaving both the family and the enterprise well positioned to evolve, grow and thrive for generations to come. So the real benefits won't be seen today — but tomorrow.