Bringing the Children into the Family Business

Passing the torch to your children is the dream of many business owners. If you share this dream, there's work you need to do to make it happen.

One Problem

Uncertainty.  Business founders and heirs often disagree on roles. Who should take the reins and when?  How should things be run during the transition years? 

Many company founders are hesitant about asking their children to make the same sacrifices and commitment they have had to make.

The Biggest Problem

 Lack of succession planning, even in businesses in which both generations agree that the children should join the company. Long-term goals and objectives are often vague and informal. Many business owners say they want an heir to take over the business however, they have not actually appointed a successor. A formalized and written succession plan eliminates a potential a state of limbo and uncertainty.

What You Can Do to Encourage the Best Decision

Encourage teenage children to "sample" the business through part-time work. But make sure the job description is well-defined, and, if possible, that someone other than a relative is their supervisor.

·         Recommend that they work elsewhere for several years after completing school. This gives them the opportunity to gain experience and maturity. It also helps build confidence and gives them a chance to see how other businesses are run.

·         Tell your children why you started the business, what it means to you and where you see it going in the future and Respect their vision. Even if your children enter the business, they may want to do things differently. Give them an opportunity to do so.

·         Let them start at the bottom and work their way up the ladder.  Have them work a year in each department or division. This provides valuable experience and the opportunity to learn every aspect of how the business works. In just a few years, they can become valuable assets to the business and will be well prepared to step into your shoes.

There are no guarantees that one or more of your children will step into your shoes someday. But it is possible to guide them to a decision that benefits both you and them.

Making Your Succession Plan Work

Whether it's a blood relative or a loyal employee, it is important to put your succession plan in writing. You need to formalize terms and conditions, so the transition can go smoothly.

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Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.