Many parents who are small business owners may have always assumed that they would pass the company on to their children. They believe the business will stay in the family. They see it as a valuable asset and want to leave it to the next generation.
This is common historically, but this trend does appear to be changing. On one hand, adult children do not always want to inherit the business in the first place, so they may not be as interested as their parents believe. At the same time, some studies have found that business owners do not even want their children to inherit the company as often as they once did.
In one study, for example, 52% of business owners said they did not want their children to take over the company after them, and 94% of business owners said they would rather their children find their own path in life.
Business succession planning conversations
Naturally, business succession planning is still important, even if children are not going to be involved. A parent may not be leaving their small business to their firstborn child, but they may still be leaving it to an employee, a business partner or someone else who will take it over and run the company moving forward. Having a concrete plan in place can help this process go smoothly.
But for both parents and children, it is clear that some conversations need to take place in advance. Parents should not assume that their adult children want the business, nor should children assume that they are automatically going to inherit it. These types of assumptions can complicate the process and create mismatched expectations, which increase the chances of conflict. Talking about the business succession plan in advance can help ensure that everyone is on the same page, which is often best for both the family and the business entity.
During the course of these conversations, it is important to understand how to draft a viable business succession plan that will work for everyone involved.