Consider the case of a prominent Nigerian entrepreneur who builds a multimillion-dollar conglomerate. He passes away unexpectedly without a clear succession plan. His family, unprepared for the sudden responsibility, face legal battles and internal conflicts that threatened the stability of the business. This situation and the negative ripple effects that follow can be avoided with a well-thought-out succession strategy.

Statistics show that around 70 per cent of businesses fail by the second generation, with this number rising to 88 per cent by the third generation. Succession planning is a critical yet often overlooked aspect of managing wealth and businesses. As we build our legacies and look towards the future, ensuring that our businesses and assets transition smoothly to the next generation is essential. However, many of us delay or avoid this important process, leading to uncertainty and potential conflicts.

Anyone who spends a significant part of their lives building successful enterprises and creating wealth, should consider the possibilities that could occur if they are no longer in the picture, or they become unable to take decisions regarding their assets. Will the family be equipped to continue the wealth generating activities? Will the businesses continue to prosper, or will they falter due to lack of clear leadership and planning?
Here are practical considerations for seamless succession planning:

Start early
The best time to start succession planning is now. Waiting until the last minute can create unnecessary stress and complications. Begin by having open conversations with your family and key stakeholders about your intentions and expectations. How do you envision the future of your business? Who do you see as your successor?

Starting early allows you to address potential issues and make necessary adjustments over time. It also gives you the opportunity to mentor and guide your successor, ensuring they are well-prepared to take on the responsibility when the time comes. By integrating succession planning into your overall business strategy, you create a proactive approach to securing your legacy.

Identify potential successors
Choosing the right successor is crucial. Look for individuals who not only possess the necessary skills and experience but also share your vision and values. This could be a family member, a trusted employee, or an external candidate. Ask yourself, who has the leadership qualities and dedication to steer your legacy forward?
Assessing potential successors involves evaluating their strengths, weaknesses, and commitment to the business. Consider implementing a mentorship programme to develop their skills and understanding of the business.

Additionally, involve them in key decision-making processes to provide them with hands-on experience and insight into the complexities of running the business. Instil financial literacy and business acumen in the next generation from an early age. Provide opportunities for them to learn about the family business and its operations. This education prepares them for future responsibilities and fosters a sense of ownership and commitment.

Develop a clear plan
A well-documented succession plan is essential. This should include the roles and responsibilities of the successor, timelines for the transition, and any training or development needed. How will you ensure a smooth handover? What steps can you take now to prepare your successor for future challenges?

Creating a clear plan helps to minimise confusion and uncertainty during the transition period. It should outline the strategic goals and vision for the future, ensuring continuity and stability. Establish milestones and benchmarks to measure progress and adjust the plan as necessary. This structured approach provides a roadmap for your successor and the entire organization to follow. Establish mechanisms for resolving conflicts that may arise during the transition. Mediation and arbitration can help address disputes amicably and maintain family harmony.

Professional engagement
Work with professionals to ensure that your succession plan is legally sound and financially viable. Legal and financial advisors can update your will, trusts, and any other necessary documents. Are your assets structured in a way that minimises tax liabilities and maximises benefits for your heirs?

Engaging professionals ensures that all legal and financial aspects of the succession plan are thoroughly addressed. They can provide valuable advice on asset protection, tax planning, and estate planning. Regular consultations with these experts will help keep your plan up-to-date and compliant with current regulations.

Communicate transparently
Transparency is key to avoiding misunderstandings and conflicts. Keep all relevant parties informed about your plans and the reasons behind your decisions. How can you foster an environment of open communication and trust within your family and organisation?

Open communication helps to build trust and ensures that everyone is on the same page. Regular family meetings and stakeholder briefings can provide a platform for discussing the succession plan, addressing concerns, and obtaining feedback. This collaborative approach fosters a sense of inclusion and reduces the likelihood of disputes. Encourage involvement in philanthropic activities and social responsibility initiatives. This not only reinforces family values but also enhances the family’s reputation and legacy.

Regular review and update
Succession planning is not a one-time task. Regularly review and update your plan to reflect changes in your business, family dynamics, and external factors. Are you adaptable to changing circumstances? Is your plan flexible enough to accommodate unforeseen events?

Life is unpredictable, and circumstances can change rapidly. Periodically revisiting your succession plan allows you to make necessary adjustments and ensure its continued relevance. Schedule annual reviews or whenever significant changes occur, such as new business ventures, family additions, or economic shifts.

Conclusion
Seamless succession planning is not just about preserving wealth; it’s about ensuring the continuity of your legacy. By taking practical steps and asking the right questions, you can pave the way for a smooth transition and a prosperous future. Your legacy is too important to leave to chance—start planning today and secure the future for generations to come.

Incorporating these steps into your succession planning process will help you create a robust and adaptable plan. By starting early, identifying the right successor, developing a clear plan, engaging professionals, communicating transparently, and regularly reviewing your plan, you can ensure that your business and wealth are preserved and thrive beyond your lifetime.

Seun Lijofi is an Advisor at the Meristem Family Office and can be reached via: familyoffice@meristemng.com