Family businesses can be wildly successful and last for generations. They can also fail as soon as they pass down to the next generation. One thing that many business owners are afraid of is that they’re going to leave a successful business to their children and those children are then going to run it into the ground.
If you’re worried about this possibility affecting your business, it’s important to consider exactly why these businesses tend to fail and what type of planning you can utilize to avoid that same future for your business and your heirs.
Succession planning is never done
First and foremost, a lot of businesses fail because the owner doesn’t engage in succession planning. If you’re already thinking about this process, your business has a better chance of succeeding than many others. You need to have a solid plan in place with a person who has been picked to run the business and who has been trained to do so. Planning in advance can help this go smoothly.
Conflicts between heirs
Unfortunately, one issue that sometimes comes up is that family members will feud once they own a business together. Maybe your daughter wants to do things one way while your son wants to do things another way. This is why planning in advance is so critical, because you can talk to your heirs to determine what they want, what their vision for the company is and whether they’ll be able to work together.
The new leader isn’t qualified
Another potential issue is that the person you give the business to isn’t going to be qualified to run it up to your own standards. Maybe you’re just leaving the business to your eldest child simply because they are the firstborn. But do they know how to run that business? Do they have the skills that they need? Do they have the proper education? This is why succession planning with a training element is so critical. You can train them on the job to make sure they can do it before you give them the business.
As you can see, the more you can do in advance, the better off the business will likely be. Take the time to seek legal guidance and to carefully consider all the options at your disposal before committing to a particular plan of action.