Family-owned businesses are the backbone of the American economy.
However, despite the job security and family legacy potential many of these businesses represent for the families that own them, the importance of careful succession planning is often overlooked. Indeed, only about 30% of family businesses survive into the second generation, according to the Family Business Institute.
While transitioning ownership and control can be difficult for any business owner, the leaders of family businesses are typically faced with the added challenge of managing family relationships, while preserving the culture and standards they have worked hard to establish. If you are a business owner hoping to pass your company on to the next generation, a few key considerations can help you successfully navigate the transition while maintaining family harmony.
Your family may have several capable members who are willing and able to take over the family business. On the other hand, not all children have the interest or skill level to run a successful company. When creating your succession plan, it is important to decide whether treating all of your family members equally is best for the business over the long run.
Family businesses that operate as a meritocracy are typically more successful than those that promote based on family relationships alone. Defining and documenting what you expect of your children and the future of the company is an important first step in succession planning. Perhaps they require additional education or training before they are ready to lead. Or, you may find that retaining key employees or looking outside the family for additional expertise will help smooth the transition. Whatever the case may be, understanding each family member’s strengths and weaknesses can help you delegate and separate responsibilities most effectively.
To create an enduring business, your vision should align with the plans your children have for the company. The long-term success of a family-run business often requires a careful balance between adhering to tradition and embracing change. Therefore, it is important to discuss plans with your children for keeping the business modern without deviating significantly from the company’s and family’s core values.
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