Passing on the family business
Transitioning a family business to the next generation can be an incredibly confronting process.
Stepping back from your business is a big move and can be quite difficult if there isn’t a solid plan in place. Succession planning helps to ease the process. A strong succession plan reduces the risk of interfamily disputes and can ensure the strength of your business continues well into the future.
Consider the following when preparing your business’ succession:
A well defined plan
A formal succession plan can help guide your business through a smooth transfer of control. Involve family members in business succession planning discussions and foster a collective family vision early on.
It is important to be realistic when choosing successors; don’t expect family members to take over if they have no interest in the business. Think strategically about the skills, knowledge, and experience required for the future success of the business and co-ordinate family members to roles appropriately.
Once you identify the successors, you will need to decide on levels of management, control, and shares of ownership. If you have more than one successor, you will need to decide on whether ownership and management will be equal, if your management team will include non-family members, and so forth.
Frequent and open communication is key for removing tension and promoting a healthy transition. Be sure to communicate your succession plans t o your staff as well as successors. Potential successors need to be introduced to the business as early on as possible. Training successors years in advance helps to teach them key business skills and processes required to run the business. It also gives them an opportunity to form relationships with important clients and key stakeholders long before succession is implemented.
Financial and legal issues
A major part of succession planning is accounting for the financial and legal issues that arise with the handover of the business. Business owners need to evaluate their options, such as the decision to sell or gift the business to family members, whether a trust needs to be set up as part of the succession, and more. They will also need to address the tax implications upon sale or transfer of ownership, and in circumstances such as death or divorce.