You’ve put your whole life into your business, and it’s booming because of it. But success is never guaranteed, especially when you don’t have a plan for the future.
Over 80% of family businesses don’t have a system in place for handing the reins to the next generation. Regardless of whether you think it’s too early, you’re worried about conflict or the process looks overly complex, it can be a necessary step to put your business in a position to succeed after you step down.
The Family Business Institute found that only 30% of family-owned entities make it to the next generation, and beyond that, the numbers really dwindle. They discovered only 12% are still standing with the third generation, and that drops to just 3% for subsequent groups. They reported that the main problem was the absence of succession planning.
Start taking stock
The first step you’ll want to undergo is finding out exactly what your holdings are so you can get an accurate assessment. You can start with the balance sheets to get an idea, but you’ll also want to incorporate more complex things like investments, equipment and intellectual property. From there, you’ll have to move on to valuation, which you can use to find out the overall worth.
Coming to terms
Once you know what it’s worth, you can determine where everything will go. You can pick beneficiaries of the business, and also who will take on larger leadership roles. You’d do well to listen to your family’s input to hear what they want, need or can handle. In the end, it may be up to you to determine who gets what responsibilities, where you can divert assets and what your role will be through the transition.
The sooner you start, the more time you’ll have to make sure things go smoothly. Start educating your replacements now so you’re ready to hand things over. Setting up the whole process may be the most daunting part, but proper planning could set your business on the road to prosperity for years to come.