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2024-02-23
By: Advocate Brokerage
There are few things more satisfying than passing on your family legacy to your children or grandchildren. However, it is not as straightforward a process as it may seem. There are benefits, of course, but there are challenges in the succession process as well.
As a business owner, the company that you’ve built, likely from the ground up, is a sense of pride. It is also your legacy. Transferring ownership to family has many other benefits, including providing a solid financial footing for future generations. Passing your business along can also ensure a continued and vested interest in the business’s success by a member of its founding family.
All that said, it’s not as simple as signing a piece of paper and letting your eldest child take over on your behalf. There is no formula to definitively define who gets your business. Instead, it’s wise to sit down with your possible successors to gauge who’s interested and able to run the business. You also need to ensure that you’ve provided them with the right type of training and, ideally, have a support staff in place that can work as transitional guides.
As with all big decisions worth making, the decision to pass your business along must be made early and the plan formulated as soon as possible. This may start many years before your official exit as an officer. Consider having your children or grandchildren work in the business in many different roles. They’ll need to know how things work top to bottom before they can lead.
You also need to discuss with your children their personal goals and how those might fit in with your succession timeline. Do your children want to attend undergraduate school? Do they have plans to start a family before entering the professional world?
Another significant and potentially relationship-damaging concern is choosing your successor based on your children’s strengths. Some people are better critical thinkers while others are born leaders. Discuss with your heirs what role they see themselves in and how they think their strengths and abilities lend well to these.
Finally, remember that not everyone may be suited for the role they want. It may be necessary to appoint key executives to crucial positions or sever your professional relationship with one of your children in the best interest of your company and the people that rely on it.
There is no easy way to form a succession plan. But, form you must. The sooner you begin, the sooner you can identify potential issues and create a preemptive resolution that leads to a seamless and successful transition.
