Transferring a successful business from one generation to the next involves a lot of planning, training, and legal expertise. From dealing with the personal issues that will arise out of changing ownership (they will) to the estate, tax and day-to-day business concerns, you will have your hands full for a while. You can’t just hand the business over to a daughter or son and head off to spend your retirement years fishing and sunbathing, there is a lot of work to do to ensure a smooth succession.
Here are some tips for a smooth hand-off:
1. Make a plan.
Have a transition plan in place. Whomever is the recipient of the business, they need to be a part of the hand-off. Create a transition plan that spells out clearly what is happening, when it will happen, and how long the original business owner plans to be there after the hand-off. You owe your key employees nothing less. The new owner needs to be in place throughout this transition, employees need to get a feel for the new boss and how they will work with him.
2. Select a Successor.
This can be tricky and great care has to be paid to this process. Within a family business there are often younger members who have shown an interest through working, training and being there for the company. They may have achieved an advanced degree in college to further their stewardship of said business. When you choose a successor be aware that you will transfer both power and assets to that individual, they had better be worth it.
3. Choose Carefully.
Be careful of family members who have shown little or no interest until transition time comes, and then they bleat long and loud about how they should be the chosen. Selecting the wrong person will drive your thriving business into the ground in a matter of years, if not months. Choose wisely.
4. Take the time to groom the successor.
Different generations have different goals and mindsets when it comes to running a business. This is not to say that you won’t have lots of common ground, but you need to find the space where the two of you can work together through the transition phase. Keep communication as an imperative, you can agree to disagree, but do it civilly and keep talking about the business.
Handing over a business is not an easy or painless process. The more you plan for the eventuality, the smoother it will run for you. Set some plans in motion now, and determine how you want the business to work for you after you have retired. Choosing a successor several years prior to the fact is a huge help.