Recently, we discussed some potential obstacles to consider when business succession planning involves family. Here, we’ll look at a couple of other issues to consider.
Leaving the business to one or more people in the family has its advantages. One benefit is that you can typically trust your family members more than strangers or new investors. However, keeping the business in the family can also have drawbacks for those who take over the business and others in the company.
Disgruntled employees
The employees are the backbone of any company. Together, you have built a successful brand. If you plan to hand the reins to an inexperienced family member, then this could cause some issues. Employees may suspect a culture of nepotism and that no matter how hard they work, they won’t be able to climb the ladder. One way to prevent this is by bringing in your family member(s) early so that they can show that they deserve the position based on merit.
Authority issues
Another potential issue with keeping the business in the family is the clarifying the hierarchy. For instance, if you want several of your children to be involved, who will be the boss? Will one sibling really take orders from another? Could there be mixed signals among staff members about who is the boss?
Keeping the business in the family may certainly a viable option, but it should be carefully thought through. Whatever you decide should be enshrined in carefully crafted legal documents. Seeking experienced legal guidance will help you come up with the most suitable strategy.