Choosing between your children
After years of entrepreneurship, you’re looking forward to the day when you can retire, but the prospect of handing over your ‘baby’ to one of your children can be daunting. And if you have more than one child involved what is probably even harder is deciding which child should be on the top rung. Well the good news is that there is a right answer to this once in a lifetime decision.
Every business owner has to have an exit strategy, even those just starting out. If you have given thought to how and when you plan to exit the business, this will guide you in your day to day decision making and make the entire process, when the time does come, far less stressful.
Succession planning involves identifying the right people to take over key positions within your business but in SME businesses, succession planning often involves not just the transfer of management responsibilities, but business ownership.
Businesses have successfully been handed from generation to generation over the years and a bright future is one of the greatest gifts parents can give to their children, but the process requires strong systems in place and careful execution to succeed.
Your first decision will be who is the best person to take over the business. You must select the son or daughter who has convinced you that he or she will be the best choice for growing the business and its profits in the future. Ask yourself, do you want the best person for the job or do you want the person best able to mend hurt feelings and keep the family on speaking terms? If you're lucky, one of your children will be the best choice for both tasks.
Here are a few key points to consider:
- Time: Lots of it. The process sometimes takes years.
- Options: Consider ALL your options before you make your final decision. Harsh as it may sound, it may be better to sell a successful business and split the proceeds amongst the family that to pass it on to a reluctant heir who may lack the passion or expertise and is unable or unwilling to commit the same time and resources you do to its success. In this situation, if the business fails, everyone misses out.
- Research: What do your family members want to do? You may have one child who just loves the technical side and is not into management at all. With another child the opposite might apply. Equal partnership might be an option here.
- Action: Once a plan has been developed, put it into action. Your successor/s may need extra training both internally and externally. Give them enough time on the job to gain the experience they need and make sure they are well equipped to take over from you when the time comes.
- The legals: Make sure you complete the appropriate legal paperwork to formally hand over ownership. Don’t make the mistake of leaving your children arguing about just who really owns the business. This undermines commitment and can cause enormous family upheaval.
- Your role: Will you still be present in the workplace? What will your role be? How will you ensure you don’t undermine the new boss’s authority? Who has the last word? It is essential these details be considered to ensure the new arrangements succeed.
The bottom line is - give the situation the thought it deserves – and plenty of it. Of your children who has consistently met or exceeded goals at the business? Who has been the most innovative? Who works better with vendors, customers and other employees? Who has more of the skills required of a CEO? Has one child made a greater effort at preparing himself or herself for this day? When you remove the issue of "favourite" from the equation, the most qualified person will surface - and that person must be your choice.
That more than one of your children entered the family business and earned promotions to their present high positions says a lot about you and them. By being open with them now you will allow your family to plan properly in a way that will minimise disruption to the business and the family.
Consult your professional 10X advisers about the best strategies and how you can best take advantage of available tax provisions. Planning ahead is always best no matter what you are doing – our office is already ready to help out with any advice in these matters.
