Small businesses in this country were built by hard work and dedication. Business owners have spent so much time building their companies that they may not be sure what the future will hold when they eventually have to hand the reigns to their children or grandchildren. The key to succession planning for any small business is “planning.” When the current business owners and future generation prepare together for the eventual handoff, the transition can be made smoothly, with predictability for the business, investors, and other stakeholders.
Communication and planning will help to ensure your small business leaves behind a strong legacy of family success. Many employers take it for granted that their children will take over the company business and never have a real conversation about the future of the company. The younger generation may not want to disappoint their parents and never say they have no intention of continuing in the family business.
It is important for the current owners to talk about how their children plan to run the company. Will they continue business as usual, plan to grow the company, or transition the family business into a record company for their future singing career? Communicating plans for the future will help manage realistic expectations of what will happen during business succession.
In most cases, it is helpful to have the advice of a third party, such as your business attorney. A business lawyer can facilitate communication between the business owners and the successive generation. Your attorney will make sure you are asking the tough questions, planning for all eventualities, and work to prevent problems before they occur. This includes business consulting, tax planning, and preparing documents for a smooth transition.
Employers who have built their company up from scratch may have handled the business so tightly that their children have never had a real understanding of how the day-to-day business is run. They may fear that opening up the business to inexperienced hands will compromise the company and harm the brand. Others may rely too much on education, expecting an MBA will be enough to ensure a profitable future for the business. However, on-the-job training will allow the new generation to learn how to run the company without rushing a difficult transition.
During business succession, it can be difficult balancing what has worked in the past without becoming complacent. The current business owners may want to keep things the way they were based on past success. However, the future business owners need to keep the business relevant and make the necessary changes to keep the business thriving.
The future generations may have a vision of the natural evolution of the business while the current owners consider any deviation to be jumping into unchartered waters. Before passing the business along, the current and future business owners need to communicate what made the business succeed and what changes will help the business continue to grow without compromising the foundation of success.
The owners of a mom-and-pop furniture store may attribute their success to customer service and neighborhood connections. Their children may think the future of the company is to take the store online. By working together, the past and future generation can ensure the company continues to thrive while creating the legacy of a successful family business.
Butterfield Schechter LLP is San Diego County's largest firm focusing its law practice on employee benefit legal services and business counseling. Our firm can help you plan for successful business succession. Contact our office today with any questions on how we can help you and your business succeed.