As business leaders retire in droves, succession planning is a rising concern. Add to that an uncertain economy and organizations are under pressure to deliver value and valuation — now. New research reveals that a whopping 61% of family businesses don’t have a formal succession plan in place1, which greatly impacts longevity and planning.
To ensure a smooth transition, founders can take proactive steps to implement thoughtful succession planning. We are revisiting an article our founder wrote for Family Firm Institute Practitioner outlining brand planning best practices for the future.
Family businesses aren’t new. Some of the greatest businesses and most influential brands we know were birthed by a visionary founder. But the story doesn’t end with that founder. That is if the family—including the founder—truly invests in the future by building the power of their brand.
One of the greatest challenges any business experiences in transforming from a profitable small business to a legacy enterprise is navigating the waters of succession. An effective succession plan requires more than just moving names around on an org chart or a legal charter.
For a family brand to sustainably evolve and operate beyond its founder—or founding generation—it is essential to engage in design thinking, often supported by expert marketers and consultants. This work includes:
- Aligning around core values – The core business values must be more than family values; they must be centered around the motivators of the future stakeholders and shareholders.
- Supporting and branding the next generation leadership – To take a brand forward, the new generation must emerge as current and future innovators.
- Thinking bigger and longer than you ever have before – To successfully shift from father to son, or aunt to niece, the brand and business plan must look beyond the current generation. Otherwise, you’ll back yourselves into the same legacy challenge you’re currently solving.
- Building a true brand platform – Creating or updating a brand is more than simply renaming a business or product, or updating a logo or website. A brand platform isn’t an aesthetic exercise, it is about strategic positioning for the future.
Many companies develop a set of core values to inform the beliefs and actions of its employees. Those that ingrain these fundamental values in their brand personality and voice do more to demonstrate how the values create a true purpose and impacts the lives of customers.
This isn’t a difficult exercise, but it takes discipline to ensure that instinctual ways of being are articulated in an outward-facing reality. True brands exist when customers feel, experience, and share the brand’s values. And it is in this work, and these expressions and shared experiences, that a true brand comes to life.
For more on how core values can guide and inform growth, global consulting firm PwC developed a fantastic (and long—it’s 64 pages) white paper on fostering family values in a business. The paper addresses the three cultural dimensions of building, binding and managing values.
Promoting the Next Generation
When a family business is intimately tied to its founder, it’s difficult to forge a path for the next generation. Many brands that overinvested in the personal brand of a visionary founder struggle to find a hook or story for the next leader.
The hook isn’t, and shouldn’t be, a gimmick. Just as the founder had a point of vision or innovation, so too must the next generation of leadership. In making a pivot that builds up the brand platform, new leaders must anchor themselves to the core values when framing that vision.
It is essential that the family inheriting the business do so not just from a place of “continuing operations” but from a place of “continued leadership.”
The hard truth that people often don’t want to admit, is that the second and third generation may lack some of the vision the founder had. That’s where business consultants and your “adopted family”—those who have led shoulder to shoulder with you in this journey—come in. Use those that know the business, recognize what makes it special, and understand or learn personal passions to help form a picture for the road ahead.
Thinking Big & Long
When it comes time for the next generation to take the reins, there are operational considerations that can distract an organization from long-term thinking. New leadership should engage in an honest evaluation of their passions and how these align with the core or future business.
A great example of this is Dr. Bonner’s soap company. Hatch wrote a wonderful story about the “peculiar history” of the company, founded by Dr. Emmanuel Bronner in 1948. And while the company may have nothing on you in the way of eccentric founders, it took the blood and sweat of sons Ralph and Jim, who took over in the 1990s, to save it from near demise. Since then, the brand has leaned into its vision of conscious consumerism to grow from $4 million in revenue in 1997 to over $100 million today.
But saving a legacy business only works when the next generation is committed to a future that intermingles their passions. It is here, with Dr. Bonner’s third generation under the leadership of grandsons Michael and David, that the company took on a new vision. This placed Dr. Bronner’s on a bigger map and challenged their entire industry to reach future greatness through product innovation, a commitment to organic regenerative agriculture, fair trade, animal welfare, a focus on employer best practices and a continued commitment to bold storytelling.
Tangible and Intangible Value Of A Brand Platform
One of the fundamental, and, if you’re not careful, surface exercises family brands do is update their identity—logo, website, business cards, and collateral. But an impactful brand encompasses much more than its visual identity. The brand platform extends to physical plants and offices, communications channels, recruitment efforts for employees and leaders, and could include philanthropic or foundation activities.
Often the original brand is deemed old fashioned, outdated, and out of touch with new consumers. While that is often the case, a strategic and intentional brand platform should uncover legacy qualities, ideas, and inspirations to serve as a foundation in re-imagining the new brand.
It is painful and costly to rebrand. That doesn’t mean you shouldn’t do it-but it’s imperative to do it right. If you think far enough into the future when you engage in the exercise, and get the help of branding experts that understand and respect both the past and future generations, you can develop a core brand to live for generations to come.
To ensure success, the brand platform should be built not only around the family, but around the value an enterprise uniquely delivers to its customers. Yes, there was a time that people jumped through hoops for Sam Walton, but today it is undeniable that the Walmart brand has influence and equity far beyond the goods and services on its shelves or its tangible supply chain.
Your family started something that is now a bigger idea anchored to a long-term purpose.
The brand that emerges is about more than legacy, it must represent a vision for a growing market with an expanding customer base. Well-developed brands, anchored in positioning strategy, bring those intangible assets into the equation for business valuation. Whether or not the family intends to exit or divest of the company, valuation is critical to your ability to recapitalize to help pay back the family and reinvest for the future.
A strong brand has a value all its own. There are now accountants who specialize in calculating the equity of a brand separately from the actual balance sheet and operation. It is this intangible brand mystique that proves to the world, to future investors and to your next generation of leadership that something special was created that pays long-term dividends.
None of this is easy, but neither is running a family business. Those that invest in brands understand that this exercise is about more than running a business. Your brand is your best investment in growing and expanding your legacy to support future generations.
Originally appeared in Family Firm Institute Practitioner