When you start your own business, it’s normal to think of it as your baby… your pride and joy. However, if you want the business to outlast you, you’ve got to think in broader terms. This is particularly true of family businesses, where succession planning is essential for ensuring a smooth transfer of ownership to the next generation.

Unfortunately, succession planning is something that most family business owners overlook. Statistics tell us that only about a third of family businesses survive beyond a single generation, and fewer than 15 percent of family businesses make it to a third generation.

Succession Planning Tips for Family Business Owners

While there’s not a one size fits all blueprint for effective succession planning, there are some important guidelines that can orient family business owners in the right direction.

Start Early

Succession planning isn’t an event. It’s a process. And it’s a process you should start sooner rather than later. In fact, we recommend starting when your kids are still young. Make it a normal occurrence to talk about the business at home. And as your kids get older, be increasingly clear and intentional in discussing the joys, responsibilities, and challenges associated with running the business.

Make it a Choice

It’s important to frame business succession as a choice, not an obligation. You can make it clear to your kids that you would be honored if they showed an interest in continuing your business venture, but also be clear that you validate whatever path they want to take. Maintain an open dialogue with them, allowing them to feel comfortable discussing their interest in taking over (or their lack thereof).

Encourage Outside Experience

Statistics show that the kids who work elsewhere for a few years (say three to five), gaining business experience outside the scope of the family, tend to be more satisfied and more successful when they take over mom and dad’s enterprise. Encourage your kids to work for other people, even if they ultimately want to work for you.

Provide Defined Jobs

When your son or daughter joins the workforce, ensure they are assigned a meaningful position. A “real” job entails a well-defined role, with clear duties, responsibilities, and specific levels of compensation. It’s crucial for their experience to mirror that of other team members, devoid of preferential treatment based on birthright.

Cultivate a Broad Set of Skills

Your kids don’t necessarily need to have the exact same skill sets that you have. In fact, it makes more sense to help your kids develop complementary skills. For example, if you’re great at sales but less talented at accounting, it might benefit everyone to train your kids in some basic financial principles.

Teach the Foundations

As you think about passing down a family business, it’s normal to focus on the day-to-day stuff. Don’t overlook the foundations, though: What are the values of your business? What problems do you solve? How do you make life better for your customers or clients? What separates you from the competition? Those are the things that can prove most meaningful as your kids try to continue your legacy.

Questions About Succession Planning?

If you’re ready to start a conversation about succession planning at your family business, we’d love to be a part of it. Reach out to WhiteWater Consulting at your convenience.