1. Think out loud
Creating a succession plan as a fait accompli is rarely a good idea. There are simply too many misunderstandings, assumptions, and interpersonal dynamics that can thwart the best laid plans if you don’t communicate your ideas early and often.
2. Equality is a myth
While “share and share alike” is a good idea in theory, not every child is equipped with the same drive and talent to run your business. It may be fairer for the successor(s) you have chosen to have a larger share of ownership than family members who will be passive owners. Or it may be best to transfer management and ownership to your chosen successor and make other financial arrangements to benefit your other children.
3. Invest in training time
Your family business succession plan will have a much better chance of success if you work with your successor(s) for a year or two before you hand over the reins. For solo entrepreneurs, sharing decision making and teaching business skills to someone else can be difficult, but the effort can pay big dividends.
4. Get outside help
It can take a village to sell a business. Most owners will benefit from engaging their CPA, estate planning attorney, business attorney, and financial advisor in the planning stage. There are also companies such as PragmaVentures, Inc. and Codiligent, LLC, which specialize in business succession planning and who can help owners work through difficult issues.
5. Start early
If you want to keep your business in the family, procrastination is a bad idea. Many business succession experts suggest a minimum of three to five years advance planning. A good succession plan can ensure that you will have the funds needed to retire and that the company you have built will thrive in the hands of the next generation.