I promised you some thought starters for those of you who want to get out of your business: retirement, diversification, bored, for whatever reason. Hopefully you read my post around selling to an outsider, now here are some significant considerations for those of you who want to pass the business to children, siblings, or the in-laws who married your daughters.
If you want to pass the business to members of your family, think about these issues:
- Identifying the ones best qualified to run the business and ensuring they have the training for it, especially if you expect to get paid over time out of the profits of the business, because if they fail, so does your retirement fund.
- Choosing the best child to take over the company may not mean choosing your favorite. It may mean choosing your least favorite because they have the mind set to succeed. If the best choice is a daughter, don't get hung up on having a male run it. Make the right choice and stick with it.
- Decide how to apportion ownership among several offspring, including those who want nothing to do with running the business. Should they get the same share as those who will run it? Will they be unhappy if they don’t? Will those running the business be unhappy if they don’t get an
extra share for taking it on?
- Do you feel the kids who will run it should own more of the business than those who won't? That would be my pick, but that kind of choice is tough to make for some parents. If you can't do that, find a way to provide extra incentive and rewards for the one in the trenches. If you don't, their sense of fairness – or not – may undermine the whole enterprise over time.
- if none of your children or other family members is ready for this responsibility, because they're too young, or too busy elsewhere, or because you never let go of anything long enough for someone else to learn it, consider making the transfer contingent on them hiring a coach or business advisor to help them for the first year or two. It will probably be a relief to them, and it certainly will to you.
My next post on this subject, and the last in this series, will be about turning the business over to your employees – perhaps the most challenging of all options. Stay tuned.
As always, I welcome your comments and feedback.