How do family businesses prepare the next generation to take over? Early in my career, I worked at a publicly held gas pipeline company. Management identified newly hired “stars,” and they would be put on a fast track, spending each of the next 4 years switching from one department to another, allowing them to learn all about the company, from the view of each operating department, from marketing to HR, from business operations to accounting. Though they didn’t become experts in any of these areas, they learned the impact of each department on the company overall.
If you are an entrepreneur looking to pass your business to the next generation, you should put a plan together to prepare them for their eventual role. You should introduce your successor to each critical area of the company. Teaching them about the products you sell comes naturally to you, because that’s what you’ve lived with every day since you started leading your business. But what about the financial side of the business?
Traditionally, the CFO is responsible for the following functional areas: Accounting, Finance, IT, Human Resources, Legal, and Risk Management (Insurance). But in addition to those skills, your successor should have familiarity with or – better yet – special skills in one or more of the following areas: sales and marketing, project management, and product development. But for the purposes of these blogs, we’re going to concentrate on the details of the CFO related role in a business.
In our next installment, we’ll cover the topics of IT, Human Resources, Legal, and Risk Management (Insurance). Remember, you didn’t need to become an expert in all of these areas, and you don’t need your successors to become experts either. But if they don’t understand how and why each of these areas are important, if they don’t know the right questions to ask, they run the risk of having problems crop up that could have been solved with a little preemptive action, rather than a panicked response caused by failure to act when things were easy.
As I tell my clients and my family, when you are faced with problems, it’s easier to address them early. You can always resolve them, but the longer you wait, the more difficult and expensive the solution becomes, and the fewer options there are. Knowledge and experience give you a head start in anything that you might face.
Most business owners get financial reports monthly: Profit and Loss, Balance Sheet, Statement of Cash Flows. Some look at them
I’ve seen it happen often. An employee walks off the job, and there is a sudden scramble in the office.
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