Those who build businesses sometimes console themselves about the hard work paying off by handing the successful company to their children and even subsequent generations. This was an easier task for past generations for a variety of reasons, but it is still possible to do it.
Business experts suggest five issues to consider when assessing whether passing the business makes sense to the owner and potential beneficiaries.
- Determine interest: Businesses are created on the dreams of their founder, which may not be shared by his or her children. Like it or not, the eldest son may dream of being a sports blogger rather than taking over dad’s small insurance agency.
- Prepare them: Children know better than anyone how hard a parent worked to start a business, but they may not see the skills needed to do it. Encourage business degrees or training with other organizations for five or 10 years, which can later serve them in running the business.
- Create swim lanes: Figure out the talents and interests of the children and move them into that swim lane. This enables them to each have their own role without competing for one job. This collaborative approach is a great way to grow a business. The ownership structure can reflect this as well.
- Stick around: Clients do not like it if the reins are handed over to junior as you walk out the door. Facilitate the core relationships with customers, provide hard-earned wisdom but let them run things as they see fit as long as it does not endanger the success of the company. Sticking around also enables the parent to savor their time as a mentor.
- Seek help outside the family: If a parent is unable to groom the children, a trusted steward will be a necessity to avoid running the company into the ground.
Legal guidance is a part of the transition
Knowledgeable business law attorneys can also be a part of the outside help. Not only can they draft contracts, modify the business structure to reflect the new ownership and create other binding agreements key to the running of a successful business, they can also help the next generation move forward as expected and unexpected challenges appear.