Preparing For A Family Business TransitionOne of
the most important factors of a successful family business transition is
planning and executing the "hand-off" to the next generation. It is essential
for the next generation to fully understand all aspects of the business,
including day-to-day operations, company finances, long-term business cycles,
how to hire and manage employees and how to negotiate relationships with
partners and vendors just to name a few. At the same time, the successors also
must learn to find innovative ways to maintain profitable growth in the face of
competition and the ever-changing business environment. If you think about it, it's
a pretty tall order. This is why preparing your family members for a business
transition and developing a solid succession plan is so important.
in a family business, especially one that is multigenerational, it is just
assumed that the next generation will want to take over the business. This
isn't always the case and may cause trouble down the road. You should make sure
that your successors want to take over the business and are able, in terms of
knowledge and skills, to manage the business. If you plan to keep the business
in the family, make sure that you spend time developing the business and
leadership skills of your successor(s) well in advance and they actually want
to take over the business.
an internal transfer is typically less complicated from a business perspective,
it may be quite complicated from a personal/relationship perspective. You
should have a plan in place before approaching your children or family members.
of the most difficult challenges include:
- Deciding who will succeed the current owner
as President or CEO
- Preserving and building the company's value
during a transition
- Providing a smooth transition for owners,
successors and key employees
it may seem that splitting everything equally among your children is the
fairest way to divide your business, it may not be if only some of your
children work in the business. We have seen situations where this strategy
resulted in the children choosing sides and destroying their relationships with
one another. There are other ways to leave wealth to children who do not work
in the business to keep everything equal and not cause a rift between members
of the family.
also seem like gifting company shares to your family members is the right thing
to do. However, having family members pay for shares in the company (which
could be at a discounted rate) will help to ensure that they truly value them.
There are also creative ways to minimize taxes and maximize wealth that should
be considered before a gift or an internal sale is consummated.
of the most important keys to overcoming barriers during a family business
transition include: ensuring complete transparency during the process,
developing strong family governance, and a putting together a strategic written
succession plan. Especially in small and family businesses, succession planning
can involve a lot of emotional turmoil, and it is often helpful to turn to an
outside, impartial group of advisors for help with navigating the process.
the chance of a family business successfully transitioning from the first
generation to the second is about 30% and the odds get worse as you move to
third generation - less than 10%. Make sure that you give yourself and your
successors enough time for the transition process, and that you're informed
about all of the choices available so that you can make the best decisions for
you, your family, and your business.
planning and choosing a successor for a family business can be fraught with
challenges but in order to be successful, the emotional aspects need to be put
aside in order to focus on the business. Having a sound succession plan in
place can take the emption out of the planning and help ease the transition for
both the business owner and his or her successors.
article was written by Kathy Richardson-Mauro from Business2Community and was
legally licensed through the NewsCred publisher network.
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