Next Generation Planning For Your Family Business
If you’re like many small business owners, you’ve poured your heart and soul into launching your business and making sure it thrives. The idea of allowing your enterprise to fade away after you die may be unthinkable. After all, in many ways, your business is your legacy.
As is often the case, you may have focused a lot of your time and energy on day-to-day operations and put off creating a succession plan for when you’re ready to step away from the helm. The problem is lack of planning can have disastrous consequences, especially to those wanting to keep the business in the family.
According to the Harvard Business Review, only 10 percent of family-owned businesses remain active and privately owned long enough to make it into the hands of the grandchildren of the original owners. What kind of planning should you do if you want your business to have a chance at longevity?
Chart Your Course
First, you need to decide on a direction for your business. Unless you want to dissolve your business upon your retirement or death, you have two choices. You can pass the business on to family members or other beneficiaries, or you can sell the business. Many business owners choose to keep the business in the family. While this option is typically the most appealing, it requires careful planning.
Choose Your Successor
The next step in the planning process is to choose your successor. This is a critical choice and it can be one of the most difficult you’ll make. Too often, business owners choose their successors poorly. For example, it can be tempting to put your oldest child in charge of your business after your death, even if that child has no experience and no real interest in taking over your company. This choice can prove catastrophic for your employees and for the future of your business.
As you think about potential successors, consider which of your loved ones understands your business, has the appropriate training to fill your shoes, and – perhaps most significantly – has the desire and drive to take control of the day-to-day operations. If no one fits this description, talk to your estate planning attorney about other alternatives appropriate for the size and complexity of your company. For instance, perhaps your family members could maintain ownership and control by serving on the board of directors, while a passionate and knowledgeable employee could handle the daily operations.