Any family business that has looked at keeping it in the family and successfully transitioning ownership to the next generation can tell you it's a tremendous challenge.
For these firms, succession goes far beyond estate planning and management. If you're thinking about passing your business on to family members, it's never too early to start laying the plans. Start as soon as possible to move through the following phases of family business succession.
-The first phase is known as the "founder's transition" and serves as the foundation for the rest of the process. If the founder is not willing to make a graceful transition, the rest of the going will be rocky, if it occurs at all.
If you're the founder, how can you prepare to take this leap? First, create a vision of what an enjoyable life will be like after the turnover. You've devoted yourself to the family business; now it's time to find and pursue outside interests.
While it can be difficult, you must learn to truly delegate. Transferring titles is easy, but letting go of authority may be one of your most daunting challenges.
Another important step is to position yourself so you're financially independent of the business. If your retireme nt income depends on the operating income of the business, you will never let go. Start putting retirement assets into other baskets.
-Phase two is the "family transition," which requires the help and understanding of every relative involved. Initially, you want to manage your "hat" collection. There are dozens of hats one can wear in a family business, including owner, boss, employee, mom, dad, spouse, son, daughter, sister or brother.
Every hat has different rights and responsibilities. Understand who owns which hats and what the related responsibilities entail.
Learning to communicate effectively is an important aspect of the process. Too many successions fail because families can't make important decisions. Effective communication doesn't happen by accident. Take the time to learn and practice good communication skills.
Also important are problem-solving and conflict resolution. Conflict is a fact of life in all family businesses. Developing ways to solve problems and resolve conflicts is vital for a healthy transition.
-After attending to personal and family matters, focus on phase three, the "business transition." Because the firm provides the economic fuel that keeps your family's financial fires burning, you must fan the flames.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Passing the Torch in Family Business Can Be Seamless
- 2019 CFO Awards: Business Succession Planning - Five Strategies to Ensure a Smooth Transition
- CUSTOM CONTENT: Tips for a Successful Leadership Transition
- CFO Awards 2018 Nominees: Solving the Succession Puzzle - Tips to a Successful Transition for Your Business
- ENTREPRENEUR'S NOTEBOOK---Stock Plans for Workers Pay Dividends to Employers
- Trust at Issue for Financial Broadcasts
- Treating Kids Equally Can Help Keep Firm in Family