A solid succession plan is essential to the longevity of a family business.
Though family businesses account for a staggering 50 percent of the gross domestic product of the United States, only 52 percent of family business owners have faith in younger relatives’ ability to sustain the business for generations to come, according to a PwC survey reported by Forbes.
To assuage such concerns, here are five tips on how to form a family business succession plan:
- Discuss the succession with the family. It’s not uncommon for business owners to make bold business decisions without consulting anyone. But to get your family members on the same page, develop a collective vision and establish shared goals and objectives for the business.
- Recognize blood isn’t always thicker than water. Continued family involvement in the leadership and ownership of the company doesn’t mean you need to shy away from professional management. As Forbes suggests, identify and retain a team of professional advisors.
- Establish the succession plan’s involved parties. Identify successors — both managers and owners — and decide who will run the day-to-day operations. Have a clear idea of the active and non-active roles of family members.
- Plan for an ownership transfer. There are many different options for transferring your ownership interest to the next generation. Talk to your attorney and your accountant about the best way to transfer your business to limit gift and estate taxes. Be sure to address these issues in the event of death or divorce, too.
- Balance the needs of the aging and the youthful. Address the retirement needs of family owners, but don’t brush off the goals of next-generation management. To avoid future decision-making disputes, put meeting minutes in writing and share these documents with everyone.
To explore family business succession strategies that meet your specific needs, consulting a small business attorney or may be a good place to start.
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