Moving On: How to Pass Your Business on to Family Members

You’ve worked hard to make your business the success that it is today, and you’re nearing the point where you’re ready to pass it on to your children. Like all business decisions that you’ve made up to this point, transitioning the company to the next generation requires a lot of careful consideration and preparation. Before you start planning, however, ask yourself a hard question: are any of your children interested in carrying on the business? Although an intergenerational success story is an appealing legacy, confirm that your children are willing to take it over. 

If you own a company that makes computer hardware and your only child has their heart set on (for example) a teaching career, trying to keep the business in the family probably won’t work. Trying to fit a square peg in a round hole is one of the reasons why a lot of businesses don’t make it past the second generation. If at least one of your children is genuinely interested in following in your footsteps, here are some tips that can help you prepare for a generational shift.

1. Help Them Prepare

If any of your children express an interest in your business when they reach college age, encourage them to pursue an education that can give them the skills they need. If you have a software company, a computer science degree could serve them well. If you run a successful grocery chain, a degree in business administration would be appropriate. The goal is to point them toward an education that will make them a credible successor.

2. Have Them Work for the Company First

One of the most common mistakes made by family businesses is immediately promoting one’s children to leadership roles. This move hurts your child’s credibility because all the employees will know that he or she only got the position because of family ties. Have your son or daughter earn their way up the ladder and only promote them when they exhibit stellar performance. By the time you leave, no one will question your child’s ability to do the job.

3. Clarify Responsibilities

If you have more than one child who is interested in working for the company, you can reduce and even eliminate competition or jealousy by giving each of them a division that they can run. If you look on most websites for family-run businesses, you’ll see the owner’s children leading divisions like sales, marketing, and client care. This arrangement gives your children a chance to collaborate without stepping on each other’s toes. If you set it up while you’re at least five years away from retirement, you can confirm that the arrangement is working before you exit the business.

4. Get professional advice

If you have questions or need advice about passing your company on to the next generation, working with a business succession strategist can provide the answers and insights you need. At Soterian, we show you how to prepare the business and your family for the upcoming transition without impacting current and ongoing operations. 

To learn more about the Soterian Process of Finding Your When, click here to schedule a time to discuss how we can help!

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Soterian

At Soterian, our goal is to help business owners like you think bigger. Bigger than today, bigger than your business, bigger than yourself.

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