Did you know that only 30 percent of family-owned companies last into a second generation, and then only 12 percent last a third generation? Regardless of where you are in the lifecycle of your business, it’s never too early to plan for the future, and if that future includes a succession to another family member, there is no time like the present to start working toward that goal.
Ask yourself, “What is the objective or mission statement of the business?” Profit? Legacy? Financial security? Social change? Then ask yourself, “What am I building the business for?” To sell? So I can retire? For my children? For the community? All are valid reasons and should be communicated to whomever is set to follow in your footsteps.
Start holding meetings with family members at least once a year. Include not just those active in the business, but also those who have an interest (such as kids), and begin to build a plan for the eventual transition to that next generation. Prepare a “State of the Business” that gets reviewed at that meeting. This might include a financial review, discussion about your hopes for the business after you retire, ideas on the future, plans for existing employees and what you want to leave as your legacy. If you have children in and outside the business, remember each person will have different views of fairness between the siblings as the torch is passed to that next generation.
And don’t forget the loyal employees who have been with you for many years. Remember that they have needs, wants and families, and will be impacted by your decisions. Help them understand what is taking place so they can feel secure throughout the transition.
If you have been the sole owner, it may be as simple as passing that sole ownership to the next person. But if you have multiple owners and or multiple family members in the business, you will need to decide how decisions are made after you retire.
You may also find it would be helpful to include an outside guest in those meetings, such as a trusted friend, an accountant or lawyer. There may be times that an outside voice can assist you and the family in transition, balancing business needs with family needs and well-being. You may need to address your feelings such as, “Without me my business would not exist,” or “My kids are not capable of running the family business.” Conversely, if one or more of your children will run the business you may find family members thinking, “I was not chosen to run the family business,” or “My parents have not given me an opportunity to learn about the family business.” It’s very possible those feelings run deep, and if you don’t get those issues on the table at the family meetings, the transition may be rocky.
Business succession is an emotional, once-in-a-lifetime decision. Don’t allow yourself or the business to end up in the hands of strangers deciding what is best. Take that first step, sit down with your family and start making a plan for everyone’s future.