Running your own business can be empowering and liberating, and if you work with family, the sense of shared achievement can be wonderful.
Where things can get more difficult, is when it comes to thinking about your exit. If you want to transition ownership to family, the exit planning process may carry additional pitfalls.
Communicate, Communicate, Communicate
You’ve got a vision for your business but do your family members or other successors share that same vision? Sit down and carefully discuss with family members or other key people the plan for your business upon your departure.
Start communicating early and keep everyone informed during each step in the process, both while the family business exit plan is being developed, and while the transition is occurring.
Because you’re a family business, you may think this will mean a smooth transition when you exit, but that’s not necessarily true. Take care to plan carefully so that the business goes into the right hands.
As much as your family members may want to take over (and even think they have the right to do so), they may not have the expertise to do so.
It’s not fair to spring surprises on family members who think they’re going to be put in charge as “heirs apparent,” for example, but who won’t be because they don’t have the skills to run the business properly.
Make sure anyone you appoint as a successor truly has the skills to run your family business – even if they’re not actually family. It may be necessary to organise training, or for you to spend extra time with your successors, handing over the invaluable knowledge harvested during your working life.
Look Outside the Family
As much as you may want your family business to go to actual family, you may face a situation where that’s not going to be possible. It may be, for example, that your family members don’t share your passion for your business and will be going into entirely different fields.
Alternatively, as stated previously, it may also be that family members simply don’t have the skills to manage the business themselves. In this case, they may be able to assume lesser roles at the business and stay involved, without being in charge.
Be realistic and clear-eyed about your succession choices – it’s important to make good decisions for the future of the business.
Taxes Count, Too
There can be significant implications in regard to taxes with your family business succession, so make sure that you understand what these implications are well in advance of your own exit. Inheritance taxes and capital gains taxes may significantly impact how the succession should occur.
Now you’ve considered the complications of succession planning for a family business, we hope you feel positive about your options.
With careful forward planning, there’s no reason your exit plan can’t be developed and communicated in good time, leaving you free to hand over the reins of your lifetime’s work, safe in the knowledge your legacy can continue.