You want your business to last as you pass it down to the next generation. It’s not just about your legacy—you know that the business can be a significant asset that provides income for your family for decades after you’re gone.
As such, it’s important to identify some of the reasons why family businesses tend to fail. There may be steps you can take with business succession planning and estate planning to avoid these issues.
Feuding family members
Conflicts between family members are a major reason why these businesses are not successful. Siblings may disagree on who gets to make decisions or who should be in charge. While developing a business succession plan, have careful discussions with family members and clearly define their roles to help prevent disputes.
The leader isn’t qualified
Another problem arises when the person who takes over the business simply isn’t qualified to do so. Don’t assume that someone can run the business as well as you can just because they are your direct descendant. It can be helpful to start business succession planning years in advance so that you can train them on the job and ensure they are prepared to run the company successfully.
Differences between generations
The next generation may have different goals, values or business strategies. As you work on your succession plan, it’s important to be open-minded and communicate with them. How do they see the business? What is their vision for the future? How can the business succession plan be structured to help them succeed?
These are just a few issues to keep in mind. It’s essential to understand the necessary legal steps as you navigate this process.