For many a proud entrepreneur, the ultimate goal when starting a business – nurturing it through initial success, and then standing by it as it becomes its own independent entity – is to pass it on to family.
This kind of exit strategy does much to establish an exciting future for the business, right off the bat.
But when it comes to passing the torch, the transition from generation to generation can be fraught with unknowns and unexpected challenges. It’s a good idea, then, to have a succession plan in place that defines your intent, and then has the right steps in order, to better establish who will be taking over and when.
How to transition a family business?
It can be taxing
And by that we mean there are tax implications to consider. These may include transfer taxes, individual taxes, inheritance tax, and business tax. There are also tax-advantaged ways to transition ownership to family members.
Who will be the chosen one?
Now, this shouldn’t be about forcing anyone to do anything, or making anyone feel obligated to fulfill your business legacy. But it’ll be a good step to establish interest from the start – who would want to take over your business? Then, if you’re lucky enough to have a taker, educate them in the roles and responsibilities of the undertaking, leadership skills, the fundamentals of running a business, and even investing in its future – bestow upon them the knowledge and experience that has helped you become a person that has a valuable business to pass on.
Family is family, but business is business
There is the very real possibility that the next generation will need to change how the business is run. This isn’t because they don’t like your style, it is more as a necessity to transform the business to fit their way of leading and for them to have a leadership team that believes in their management style and vision for the future. Destined is often brought in during these times to create the transitions roadmap, gain buy-in from management and slowly morph the company to be successful under the next generation’s leadership
And if there is interest, remember to keep family and business as separate entities as much as you can. Nothing is worth losing due to petty politics.
Transitions can become sensitive matters when loved ones are involved. Generations have differing views – and certainly when it comes to business. But communication is vital when looking to transition to family members. So, if you establish your vision for the business, and their interest in taking over, it could avoid unnecessary disputes when the time comes for the handover. But the best laid plans sometimes don’t stand the test of time, so involve your family in your succession planning on a regular basis. It’s a good way to get everyone ready and excited for the future of the business.
Find out how Destined can help you with legacy building assistance for family businesses.