There is something special with entrepreneurs and their children. We hope those risk taking genes have been passed on and that someday our kids will take over the business and make it bigger and better. The problem is that all too often trying to get our heirs involved in "the business" is more of a nightmare than an American dream.
That’s not to say that getting children involved in business is not a good idea. Quite the contrary, it’s a mistake not to get them involved. Beyond the tax benefits, there is a lot to be learned during those young years. The mistake comes when parents think that their children have to follow their footsteps in business. And the challenges don’t end with the kids. Spouses, parents, brothers, sisters, or whoever else might be involved means that you have to give special consideration to the day-to-day attitudes between family members.
One of the secrets to bringing family into business is that when you turn on the phones in the morning you take off your family hat and put on your business hat. And when you turn the phones off at night, you do just the opposite. It's not easy switching personalities and one of the major causes of strife in a family business comes from the failure to communicate properly. Sometimes too little communication and sometimes too much!
If your offspring do decide that he or she wants to become the next "you" it's going to take some planning to make things go smoothly. If you are ready for your heirs to take more of the burden of the day-to-day grind, here are some tips that will help you transfer the business from one generation to another.
Plan early. One of the first things is to be sure that your son or daughter is interested in taking over. Too often children are not interested in the business, but they stay involved because they don't want to disappoint their parents.
Have honest conversations and lay out a plan for the kids to gradually take over responsibilities and authority. When a founder has been at the head of the company there is a tendency to become established as "the company", particularly in the eyes of customers, suppliers, bankers and others in the community. It's important that the heirs establish themselves as primary company individuals early on.
Meet with legal and financial advisers. Good advance professional advice to convey ownership of the business can often save considerable tax dollars and legal conflicts.
Establish a time line. Some areas to consider include how the heir will take over responsibilities and decision making and have the legal authority to act on behalf of the business.
It’s important for the founder to step back. As an heir begins to do his or her own thing, the business and family relationship can become strained if the founder continues to act as the leader rather than as an adviser. Consider the adage, "Lead, follow or get out of the way" and for the transition to succeed it's important for the founder to know when to lead, when to follow, and when to get out of the way.
Everyone, including employees, need to be aware of what is happening. It takes more than family to make a business succeed. Don't forget the employees who have given their dedication and labors to the business. Don't make the mistake of trying to mislead or patronize them about what is happening.
Family businesses offer many unique situations, even in the normal day-to-day operations, and passing the business on to family often adds to the strain. The most common mistake that families make in a business transition is a lack of planning and the failure to get good advisers. Even if the transition is 5 or 10 years in the future, now is the time to start talking about it and planning to make it happen.