As you prepare to move on from your business, you start thinking about your employees. Do they now face an uncertain future? Or will they stay with the company?
If you're planning to pass a small business on to your children, you cannot understate how important it is to have a good succession plan. It's about more than just you or your heirs. It's also about the employees and the economy as a whole.
While thinking about business succession planning, you have probably come across some rather daunting statistics. For instance, a massive 70% of family businesses do not make it to the next generation. About 88% fail by the third and 97% fail by the fourth.
You own a family business. It's been successful, but you worry that your children simply see it as an easy career. By virtue of the sheer luck of being born into your family, they will always have a job waiting for them.
You have a vision for your family business that goes beyond your immediate interaction with it. You want to leave it to your children. You hope that they can in turn leave it to your grandchildren. You want to create a legacy that spans the generations and provides income and opportunities for decades to come.
The family-owned business is often thought of as an American staple, the thing that forms the backbone of the economy. That said, there are many different businesses that people choose to start. They all operate much differently and those planning to pass their businesses on to their children need to plan accordingly.
For most people who start a family business, the dream is to have it stay in the family for generations to come. The founder may think of that as a gift to the family, giving them meaningful employment and an easy income. They may think of it as a stepping-stone, assuming that their children can build on what they started. When asked, about 88% of people who run family-owned businesses think that those businesses will stay in the family for at least five more years.
Does your child essentially think that your business has to go to them when you're done running it? Are they not just waiting in line but expecting that this is part of their birthright?
One way to transfer your family business to one of your children is simply to sell the company to them before you pass away. They take over ownership, and you don't have to worry about suddenly handing them the company at the end of your life.
Business succession planning gets complicated. If you leave a company to your children, are you making their career choices for them? What if they wanted to do something else with their lives?