10 Common Mistakes Made When Handing Down the Family Business: Part 2

Last week we started discussing the top 10 most common mistakes business-owners make when initiating a handoff to the next generation. This week we continue with the second half of the list.

Family Business Success5.    Not considering the drama imposed when dividing the business for equal distribution among family

Feelings may or may not be hurt when you decide who will be best for the takeover of your company. There’s a reason there are so many warnings against mixing family with business. Last week we reminded you to be sure to fill the roles based on individual skill, not politics. So your oldest isn’t the best leader but he’s great with accounting. Put him in charge of the books but expect that he may not take that news so well.

6.    Not working together

Once you choose your successor, they should be in on molding the future of the business as soon as possible. If you have to rework your business plan for a change in market, increase in sales or even just to accommodate a new manager, bring them in on it so you can work together. Not only will it will make the transition go more smoothly, it will give you the chance to pass on your well-earned wisdom.

7.    Not working out financial details

Will your family buy you out of the business? Will you stay on as a silent partner? Are you going to continue making decisions or leave them in charge completely? Do you have your legal papers and taxes in order for new ownership? These are very important things to get settled before anybody goes anywhere.

8.    Only considering family

You may want to keep your business in the family for the long-haul but consider the possibility of introducing someone with more experience. If your familial successor hasn’t been shadowing your day-to-day business functions for a long enough time, they could find themselves in over their head once the hand-off is made. If no one is truly ready for the responsibility, the business may not be around for the long-haul. If you bring in a professional manager to lead, the family can still run the lower-level functions, and your business not only stays afloat, it stays in the family.

9.    Not filling in your customers and vendors

Small businesses generally have great relationships with their customers and work closely with suppliers. If a big change is about to occur and your customers need to get used to working with someone new to fill their consumer needs they should know about it beforehand. This includes introducing your successor to them so they can begin to develop a relationship while you’re still around.

10. Not fully letting go

You built your business from the ground up – no one blames you for being attached. But if you’ve made the choice to move on and let the kids pick up the slack, you need to let them. There’s nothing more stressful on family or business when there’s leadership ambiguity, and with you sticking around hovering over your newly appointed manager, you will create stress and confusion. Mentally and emotionally prepare to walk away when the time comes.

Think you’re ready to start preparing your business for the next generation? Start now and remember these steps as you embark upon your new journey.

If you’re a late-life entrepreneur seeking support in business planning as you prepare for retirement, Prime Strategies can offer the necessary guidance and expertise to help you reach your goals.

10 Common Mistakes Made When Handing Down the Family Business: Part 1

Family Business Handoff helpIf you’re beginning to plan for the days ahead when you finally retire and allow the next generation to take over the family business, take heed to these first 5 of 10 common mistakes business owners make during the handoff.

1.  Not planning early enough for your succession

Passing down your family business is something that needs time and attention in order to run smoothly. You might be anticipating retirement, but to ensure a successful transition, plan even further ahead in case of illness, disability or even death. Since the success of your business handoff relies heavily on your family’s participation, experts suggest planning several years in advance.

2.  Assuming your kin will mobilize automatically

You can’t jump to conclusions about the next generation’s desire to take over the business. They may want to break from tradition and start their own business, or enter a new field entirely. Avoid presumptions and have open talks about all of the possibilities well enough in advance.

3.  Not seeking professional guidance in your exit planning strategy

As a business owner you should know when it’s important to seek out advice from professionals or people who may be better equipped to handle such circumstances. The end of your career as the owner or president of a company should be treated with the same delicacy and attention as any other part of it. There’s a lot to consider for yourself, for the business and for the family members who will continue to run it. Consult someone with experience in this spectrum who can help guide you through the transition making sure all your bases are covered.

4.  Filling key positions based on family politics

Deciding who will fill what role won’t be easy. This is where family life and professional life collide and it’s a tricky situation to be in. You want to be open to peoples’ differences and allow their strengths and weaknesses to find their way into the perfect role to help move your business forward.  Don’t be shy about making your choice based on what counts: who’s right for the position. Your son may want to be president but he might not have what it takes. Don’t let emotion overrun your professional thinking.

5.  Expecting the same passion as you have

You built this business from the ground up with your own blood, sweat and tears. This business consumed every aspect of your life and your dedication went into making it the success it is today. Your family might be excited to step in and continue the tradition but they may not have the same fiery passion that you have about it. While it won’t be easy, you’ll have to be accepting of that. See things from their point of view and trust that what they can bring to the table will be enough.

Handing off your family business is something that takes time, planning and a lot of consideration, but you’ve come this far so you know you’ve got what it takes. There are more mistakes to be wary of during this adventure so join us next time as we complete the list.

If you’re a late-life entrepreneur seeking support in business planning and management techniques, Prime Strategies can offer the necessary guidance and expertise to help you reach your goals.