Family Money: Five Crucial Money Matters To Discuss With Your Business Partners Now

As a family business owner, you care about your business’ continuity after retiring. While you may assume that handing your enterprise to your child is as easy as giving them a gift, there are various questions involving his or her skill set, employees, finances, and personal interests that must be asked beforehand. Making the succession as seamless as possible can be accomplished, but communication and planning need to happen early and often.

Is Your Child Interested?

Kids taking over their family’s business was once common, but due to globalization, children are moving all over the world. There are new career paths they may take. However, you can make your job sound appealing to encourage a child to walk in your footsteps. As a parent, though, you have to respect your child’s wishes. If he or she feels forced into a career, he or she probably won’t do a good job. Talk to your kids about the business and what they want from a career. Let them know they have a choice.

Kids Can’t Ride Your Coat Tails

Besides feeling trapped, the child can become apathetic. While you may want your kids to take over the business one day, preparation is vital. This gives them time to improve their skills before joining the trade.

Competency is necessary before the kids lead an entire company. Before appointing them as an executive, they should see all the facets of the business. Having an employee mentor who can show them various aspects of the enterprise is definitely advisable. Also, they should be reporting to this mentor so family bias doesn’t inhibit their learning.

Kids vs. Employees

Your employees are great, hardworking, loyal people. How do you let them know that your child is going to be your successor? Experts say the key is to be honest with your workers about your succession plan as early as possible. You don’t want employees to be shocked or surprised when they find out you want your successor to be your child.

The employee mentor can be a huge part of this, as well. Let the mentor introduce him or her to the staff, as it would be more threatening if you did so. These mentors can help improve your successor’s skills and prove him or herself to your employees and customers. Getting them acquainted with your client base before becoming an executive is crucial. This allows for your loyal customers to become comfortable with the new leader, and they’ll be more likely to continue doing business with you.

Write It Up

Once your son or daughter has gone through college, worked somewhere else, and experienced various aspects of the company, it may be time to write up your plan. Even before this, a written succession plan is absolutely vital in the continuity of your business. Currently, only one-third of family businesses successfully survive into the second generation. Having a written plan can make this transition as smooth as possible.

First, identify your successors. One trap to avoid here is trying to give equal ownership to all children if you have more than one. There’s a difference in leadership, governance, and ownership. One child may be a great CEO, another may be a wise board member, and another may just be an incredible shareholder. People have different talents. Also, it’s important to include various family members in both active and non-active roles. Some may not want to participate as daily contributors but would be tremendous assets for annual event planners or occasional collaborators.

Next, set an employment policy. This includes rules on employment eligibility. If this is previously agreed upon, another family member can’t come in and say they were treated unfairly. With this in mind, you need to detail potential ownership qualifications. If a family member who is battling a substance abuse problem attempts to assume ownership of the business or any leadership role, you have a written policy in place to prevent him or her from assuming a role he or she isn’t healthy enough to fill.

Lastly, come up with a contingency plan for your successors. Life has a way of interfering with our plans, so prepare a backup plan in case of emergency. If your planned successor has an emergency, passes away, or ends up not meeting your qualifications for ownership, write down what you want to happen and who is next in line. Another good way to help with the continuity of your business is to have a board of directors help make major decisions.

Get a Second Opinion

In addition to the plans already mentioned, there are many others you’ll need to consider. There are financial decisions, for example, such as tax implications. Do you want the business transition to be considered a gift or purchase? Also, you may want to establish a timeline that works for you, your children, and your business that allows for a streamlined transition.

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RetireOnPurpose

RetireOnPurpose

Clifford Jones Founder and publisher Connect with me: Twitter Linkedin<a