Family businesses represent nearly 90% of American businesses and account for roughly 50% of U.S. employment, yet over 70% of these businesses lack a well crafted succession plan. While most owners like the idea of passing the business down to their children, family-owned enterprises often fail by the time the founder’s grandchildren take over. However, taking proactive action can help the family business avoid this and continue to grow and thrive long after the original owner has stepped aside. Looking towards eventual succession and long term business success in general, you should first develop and be able to articulate your long term business vision. You may indeed want to pass on a business legacy to future generations, or your eventual goal may be to sell the company for a significant amount of money. Either way, it’s important to know your goals so that all your efforts are working in harmony with a distinct vision. Once you have a clear objective, it’s time to put a plan in place. This is where corporate trustee services come in handy. Professional business and estate planning services can help identify the first step in family estate planning. Taking this first step can be the hardest thing to do, but it will result in proper successor identification, strengthening of relationships, mentorship and vision sharing that encourages buy-in from all parties involved. Without a clear plan and well articulated goals, you may leave your company listless and struggling for direction.
Choosing an eventual successor can be a minefield as you’re trying to avoid misunderstandings, hurt feelings and choosing an unqualified candidate for a position of power. Not all your family members will want to be involved in the business, but starting your succession plan sooner rather than later will help you strategically prepare for family growth, allowing you to act with intentionality when relatives want to invest more of themselves within the company. It’s even more important to communicate with those potentially affected by the change in leadership about their roles moving forward in the company. Properly leveraging skill sets will give them some sense of ownership in building the family legacy, regardless of who takes over. Talk with your employees, leadership and family about their strengths and personal goals and how those relate to the company. Whether the best fit for your successor comes from inside the family or out, clear and honest communication will help you avoid tensions and strained relationships. An objective third party can also be an effective resource in managing these conversations. It’s important to remember that you don’t have to take on these daunting tasks alone. Enlist the help of corporate trustee services and estate planning services as they can provide qualified legal, tax and business counsel to help guide you through planning, communication and eventual transition. Confidence is critical in family estate planning. A well-thought-out and executed process will set you, your family and your company up for success now and for years to come.