Family business owners started their business for a reason. Maybe they were seeking freedom and found a business as a tool to offer it. Possibly they had a skill, a product, or an offering that others needed that they felt compelled to deliver. They could have sought to break the glass ceiling and create their own goals and shatter them!
Whatever their why is, the what next is always a challenge.
There’s an emotional appeal to the idea of a multi-generational business.
In fact, most people consider that “family business” implies just that. Parents, children and grandparents working together in harmony for a common cause. The older generation nurtures the younger generation and when it’s time to pass the torch, they do so with as much vigor as Olympians do.
While this business setup can be the right next step for some family businesses, if assumed as a default and not given proper and meaningful consideration, it can be dangerous. Before deciding if your family business legacy includes passing your business to your children or grandchildren, there are three overarching questions that should be addressed. Taking the time to reflect on each will help you come to an intelligent, well-reasoned answer that works best for your business and your family.
Do I want my child to take over the business?
This question is mostly a matter of legacy. Do you think of your business as a “family” business, where you want to keep leadership and ownership in the family or are you merely defaulting to this option? Are you making this decision because you want to give your child a healthy and stable future, and if so, are there other ways you could do that (such as trusts, board membership, or stable non-leadership roles)? If the answer to these questions leaves you with the realization that you actually don’t want your child to take over the business, it’s important to communicate this with everyone, and pronto.
Does my child want to take over the business from me?
In the same vein, don’t assume that your child wants to take over the business. Even if they’re already working for the company (but especially if they aren’t), the added burden of ownership and leadership may not be appealing to them, or the industry you’re in may not hold interest to your child as a long-term career path. While hearing that your child does not want to follow in your footsteps and take over the business can initially feel a bit hurtful, an honest dialogue about their future will help prevent the future pain of pent-up resentment between family members.
Does it make sense for my child to take over the business?
Ah, a question that requires you to take a moment to answer honestly: Is your child the right fit for the job? In many cases, the answer may be “yes.” Children of entrepreneurs often soak up the skills needed to run a business successfully. However, this is not a given. Running a business successfully is a talent that’s relatively rare, and there’s a very real chance that your child’s specific skills fit best in other roles. In these scenarios, you would be giving your child a gift of kindness by allowing them to flourish elsewhere rather than shoehorning them into a role where they may fail themselves or fail the company.
Each of these questions are important. And each requires reflective and honest thought. If your answer to the question, “Should I pass my business to my child,” is a resounding yes, make a plan for it. Gain clarity on the role in the company they are a good fit for and create a career development plan accordingly. This is an essential investment in leadership that will help your child to succeed and grow in their new position and your business to succeed under direction of the next generation. If you find that you aren’t quite sure that your child should have a future within the company, communication is pivotal.
The good news is that whichever decision you come to, the steps you take to craft a smart succession plan are much the same and equally important. Upon the decision, the senior generation will need to plan their transition and future in the business, and nothing about this part of the journey is emotionally easy. The important truth is this: the senior generation doesn’t need to completely abandon their company; he or she simply needs to change their job description and become the designer to help develop the new system for leadership and governance. For more advice on passing on your business to your children (or others), pick up my book, The Soul of the Family Business. Through personal anecdotes, real-world case studies, useful tools and frameworks, I offer an in-depth look at how entrepreneurs can build succession plans that support both their families’ happiness as well as their businesses’ future success. Family business can stay in the family, but it doesn’t have to.