Your dentist, your salon, your auto repair shop. Also ArtVan Furniture, Avis Ford and the Detroit Lions. All are family-owned businesses. By some estimates, 60 to 80 percent of all businesses in the U.S. are family businesses.
Large or small, family businesses can face similar issues, such as sibling rivalry, vacation conflicts, and succession. You can’t plan for rivalry, and not everyone will simply pass their business ownership on to the next generation. Sometimes the kids have other interests, or they’re just not right the fit to run it.
The most important thing about a succession plan is to have one. The next most important is to make sure the family knows the plan and your expectations. The third is to make it part of your estate plan.
- Have a plan. Not having a succession plan is like skydiving without checking the parachute. These are not decisions to leave to the last minute. And you don’t want to make them under pressure. Take time to consider all your options.
- If “location, location, location” is the most important thing in real estate, then “communication, communication, communication” is the most important thing for family relations. Don’t keep them guessing whether Kenny Jr. or Katie Jr. is going to run the show. Each child deserves to know what his or her role will be, if any. If you give them the opportunity to provide feedback on what they would like to do they can get appropriate training to be successful.
- Things happen and you may not be around to see it through a smooth transition. Once you have a succession plan, be sure it’s part of your estate plan. Otherwise company finances could end up in court making the transition even more difficult.
Many business owners over 50 want to sell their businesses to fund retirement. But if the children are expecting to take over, they might be in for a rude awakening. It’s best to start early and make sure everyone knows the plan.