No matter how successful your family business currently is, it is hard to maintain that success over several generations. So many family businesses fade over time due to family feuds, fights about money, financial hard times, and a lack of consistency with business operations.
In fact, Inc. calls this the rule of thirds. Only a third of family businesses make it to the second generation, a third of that makes it to the third generation, and so on.
So how do you give your small family business a chance against the odds? It seems that successful family businesses have a few characteristics that define them: they make or sell things that last, keep manufacturing in the United States, and are able to deal with setbacks. They also stick to the morals and values that the company started with.
Another essential part of keeping up a family business is working out the succession plan.
The Wall Street Journal did a piece about how to approach succession.
Here are some tips for dealing with this sometimes touchy topic:
Discuss The Succession With the Family
While this seems like a no-brainer, you would be surprised at how many small business owners make decisions that affect the family business without consulting others.
Nothing alienates your family more than taking charge without consulting them first. This way you can ensure that you hear everyone's viewpoints. You never know which family member will express interest in the family business unless you talk it out with everyone.
When you talk things out, you can make sure that there is also no ill will in the family because of unspoken sentiments.
Write a Company Mission Statement
Once you write this down, you can get a better idea about what you want your company is and what you dream your family business will eventually become.
It will also give your family a roadmap and guide to follow in the future in case they get lost.
Write Down Your Job Description
What if your son assumes that he will become the successor of your business but you already wanted your little brother to run it?
You can write down a job description that outlines all of the tasks necessary in order to run your family business.
Once you put down all the nitty gritty details on paper, you can let them both see what the job entails. You may be surprised at how quickly people understand if they are up to the task if they see it written on paper.
Another bonus is that you may be able to include both family members by splitting up the tasks or creating new positions in the business.
Consider Options Outside of the Family
Just because mom knows best does not necessarily means she knows business. It may be easier for you to outsource your management talent.
A lot of families want to retain ownership of the business, but may not want to actually run the business. If you get some management help, it may help your business.
You can also seek the advice of consultants. Consultants are typically experts in their field and they may be able to help you maximize your business. Consultants can brought in to help plan a smooth transition during a succession or even help you plan one.
All of these tips are just the starting point for something as intensive as designing succession plans. Check out our related resources section for more information.
Related Resources:
- Operating the Business After the Owner Dies (Findlaw)
- Estate Planning: Some Special Circumstances (Findlaw)
- Brother, Can You Spare a Dime? (Inc.)
- Estate Planning FAQ (provided by The Law Offices of Smith & Doran, PC)
