When asked about how they will exit their business and move on to enjoy retirement, many business owners say "my kids are taking over."
This can be a great option if handled correctly. It also can be a source of significant pain and stress if the transition is not planned well and executed well.
If you're in a family-ownership structure now, or will be creating one as you wish to transition the business to your children, there are some very important items you need to consider.
You need to know...
Are your family members going to own the business? Work in the business? Or both?
Have you asked your family members if they understand the responsibilities of owning and managing the business? Do they even want that responsibility?
Is there a clear understanding of the roles and responsibilities of the family members who will be working in the business?
Has there been honest discussions about the possible limitations of the income and benefits the business could provide to multiple family members?
Is everyone on the same page about how much the business is really worth and how the exiting owner(s) will be paid?
Why honest communication is so important...
Many owners assume one or more of their children want to take over the business, even if they have doubts that their children could effectively own and operate the business.
Many children do not want to let their parents down by admitting that they aren't sure if they can handle, or don't want the responsibility and pressure of the business.
This scenario is challenging enough for first generation family businesses. Now imagine the complexities for existing family ownership structures looking to transition to the second or third generation with multiple children from multiple owners.
This is why it is so important to seek the help of objective professionals, who can facilitate healthy discussions among family members to make decisions that protect the stability of the business, and the family.