What happens to a family-owned pub can vary depending on what everyone’s aims and intentions are. Regardless, Sam Bacigalupo from Pitcher Partners argues that succession planning should happen sooner rather than later.
When it comes to taking over the family pub or restaurant, it’s all about which levers to pull. Is the next generation keen to be in the backroom, taking charge of the operation and pulling the levers to lift profitability and increase efficiency? Or, are they happy to just pull the levers on the kegs and leave the running of the business to someone else?
Maybe they are satisfied with retaining ownership without being involved at all, or perhaps they have other plans for their investment and want out of the pub business altogether.
So many options – yet the worst thing for your legacy is doing nothing.
Building a business takes a long time but failure is painfully fast – it’s estimated that seven out of 10 family businesses fail during the transition from one generation to another. It’s usually because succession planning has been neglected or poorly managed.
Discussion and planning are ignored or postponed until a death or a serious illness, a disaster or other life event. That potentially leaves a vacuum and confusion, which inevitably leads to a conflict.
So how do you minimise the risk of failure?
Family business transitions start with wants and needs
Each case is unique but it does start with the owners. If it’s a mum and dad operation, mum and dad need to articulate what they want from it – it’s your investment after all.
Do you envision the kids or grandkids taking over while funding your retirement? It’s vital to talk to them well before it comes to handing it over, and make sure it’s what they want.
Are you looking to cash out and sell the business, or restructure your growing empire with some outside expertise? Keep the discussions open with the family anyway, particularly if one or more had designs on taking it over.
When everyone is roughly pointed in the right direction, the next step is to bring in good advisers. These might be lawyers and accountants, or other independent parties who can get everyone on one page.
If the family plans to exit, or is transitioning from a family enterprise to a corporate structure, this step might include the next managing director or major shareholder.
Don’t forget the wants too. Business owners have worked a long time to create or grow the business, and it’s time to celebrate the financial rewards, whether that is funding retirement or embarking on a new project.
Give succession planning the respect it deserves
You’ve built an asset over time, and deciding the next stage of this asset’s lifecycle is not a five-minute process.
Think about changes and life events that might happen beyond the horizon – marriages and divorces, family members seeking to buy in or get out of the business, external suitors.
Ruling from the grave is an option but your asset can also be protected with the right structure in place, with agreements covering the necessary actions and how value will be assessed.
Owners can be hesitant about planning exit strategies for many reasons.
They don’t want to be seen delivering favourable treatment to one family member over another, or they don’t want to think about life after the pub.
Sometimes things are going well – why would I want to think about how I’m getting out when the profits are flowing?
But when things are going well, that’s the best time to start thinking about succession planning, not in the middle of a disaster or facing grief.
Start talking about post-pub life while you have a wide range of levers to pull.
This piece was first published in the August issue of Australian Hotelier, which you can view below.