The First Commandment Of Family Business Succession: Plan Early
Many of my readers know that my background is family business. My book, The Prosperous Leader, talks about my father, who founded the family business in 1955.
I recently was invited to meet the owner of a successful family-owned business and his two sons who help run it. They ultimately wanted to know how to prepare the company for the next generation. (Statistically, only about 30% last into the next generation.)
The questions were many:
• "When do we start?"
• "Should the next generation run the company or should we hire an outside CEO?"
• "How does an advisory board work? How does a family board work?
• "We are interested in projects outside of the family business. Is that a good thing?"
• "What happens if we want to sell?"
• "Can we have all the kids help run the business? How would that work?"
• "How do we share the business equally and fairly without jeopardizing it?"
• "What would retirement look like?"
Planning early is a very important aspect of family business succession. It can take years to put everything into place, and the more time you have to plan ahead, the less pressure you create for yourself and others.
As there are so many details that go into a succession plan, it’s a lengthy process. You want to have as much input as you can from different trusted advisors, such as lawyers, estate planners, accountants, family business advisors, etc. in order to make great decisions.
Here are some components to think about when setting up a succession plan:
Taxes, Shares And Assets
How are the shares distributed? To whom, and how much?