Tips for A Smooth Transition for Your Family Business
Filed under: Estate Planning
It’s a challenge that nearly every family business faces at some point. You have poured time, energy, and money into building your business. Now it’s time to think about the business’s future, and how to transition the company to the next generation. It’s a difficult challenge, one that many family operations aren’t able to overcome.
There are any number of reasons why businesses fail when they’re passed between generations. The next generation may not have the needed skills, passion, or experience. The financial burden of an ownership change may be too much for the business to handle. Interpersonal conflict could cause drama and tension within the company.
Fortunately, you can minimize these risks with effective planning. Even if you’re still years away from retirement, it’s never too soon to start thinking about your transition. The earlier you start, the more options you may have available. Below are a few tips to guide you through the process:
Define your needs and goals.
Any transition has to start with a defined goal. What should the end result of the transition look like? You can find the foundation of that goal in your own needs. Think about what you want to happen. What should your role be before, after, and during the transition? How involved do you want to be in the business? How do you want be compensated for your equity?
Also, think about how the transition may affect your employees, customers, and partners. What priorities should be in place to protect those elements of your business?
By defining your goals, needs, and priorities, you can craft a guiding mission for the transition process. Far too often, family business transitions are disorganized because the leader isn’t sure what he or she really wants. Address that issue from the outset and clearly define your values.
Solicit thoughts and input from everyone.
The transition process doesn’t have to be secretive. In fact, your family members and employees may be openly discussing future transition plans. After all, you can’t run the business forever.
If your team has opinions and thoughts on potential transition plans, why not solicit them and incorporate them into your thinking. Meet with the key players and ask for their thoughts on not only the transition, but also their ideas for the business.
By soliciting feedback, you may uncover ideas that you would have never otherwise found. For instance, you might learn that one of your children isn’t quite right to be CEO, but has some great ideas for new products and services. Keep an open line of communication and be open to input from others.
Communicate early and often.
As soon as you have a plan in place, be sure to communicate it clearly and regularly. Define what your role is and how it will change over time. Make it clear who the new leader will be and how they will transition into that role. If there’s an individual who may be disappointed by the decision, speak to them about it and explain your thinking.
There’s no such thing as too much communication when family is involved. Don’t keep your family or employees in the dark about your succession plans.
Need help planning your business transition? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you analyze your needs and goals and develop a plan. Let’s connect today.
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16110 – 2016/9/20
