Many family business owners are so busy running their businesses that they have little time for the important task of succession planning.
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However, as more and more baby-boomer business owners approach retirement age, succession planning becomes increasingly important.
Who will take over your business after you retire? What would happen if you were hit by a bus tomorrow and could no longer operate the family business?
If you don't know the answers to these questions, you have not addressed succession planning well and are putting all of the equity in your business, accrued painstakingly over the years, at risk.
"Far too often, succession planning is an afterthought," said Ron Johnson, chair of the International Business Brokers Association (IBBA). "It can certainly be an emotional issue that a business owner doesn't want to face. They don't want to think of their business going on without them."
The IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of a business brokerage and mergers and acquisitions.
Recently, the IBBA offered five great tips for effective succession planning for family-owned businesses.
- Be realistic about business succession plans. Perhaps you want to turn the business over to your eldest son or daughter, so they can follow in your footsteps. But is that really the best option? Consider another family member, someone else within the company, or selling the company to an outside party. A business intermediary can guide you through the transaction process and help you to make smart choices.
- Look at all options. Remember that management and ownership aren't necessarily one and the same. You may select one family member to be the business manager, but transfer ownership equally to several members of the family.
- Involve family members in the succession planning process. Keep family members fully informed. Developing a succession plan and simply announcing it to the family will only bring discontent when you unveil the plan.
- Bring in outside succession planning experts. Hiring the right professionals -- including a business intermediary -- will help you ensure you have the best possible succession plan. An experienced external consultant will look more objectively at the business and your goals.
- Train your successors and work with them. Take time to work with the person selected to take over so he or she knows what's needed to keep the business successful. If you simply give them control without any consultation, they are likely to fail...as is the business.
These business succession planning tips should be taken to heart by ever family business owner.
After all, deciding who will follow in your footsteps is a critical decision.
Deciding now to begin the succession planning process is the first step.