As a business owner, your dream may be to pass that business on to the next generation. You want your children to have that stable source of income for decades to come. You hope that they can build on what you created and make it even better.
Unfortunately, the statistics are a bit daunting. According to some reports, about 70% of these businesses either get sold outside of the family or fail entirely. The more generations you are removed from the founding, the lower the odds that the company will still exist.
In short, the odds are stacked against your children, and there is a minuscule chance that they’ll help the business thrive and then pass it on to their children. Yes, it can happen, but the statistics paint a fairly stark picture.
What can you do?
There are many things that you can do to avoid this outcome. Perhaps the most important thing is to create a business succession plan well in advance. Don’t put it off and then rush when you want to retire. Start early and have a well-defined plan to help the company move on to that next generation smoothly.
It’s also very important to talk to your children. Do they want to run the business? Do they have the skills to do it? Do some children want to be involved, while others do not? Having conversations about all of this can help you create a plan that really works for your family. Never assume that what they want is going to be exactly the same as what you want.
Finally, you should start the process early. If you pick an heir to take over your position, make sure they get experience working within the company. Take the time to train them in a very hands-on manner, perhaps for years before they start running the company. That experience is invaluable, and they can help you create a succession plan that works.
As you begin designing your plan and thinking about your goals, take the time to carefully consider all of the legal steps you’ll need to take.