One of the most difficult aspects of transitioning the family business is the “grooming” process between the current and next generation.
While it is meant to be a fun and positive teaching/learning/growing experience, if it is not handled properly it can collapse into hurt feelings, arguments, and conflict.
There are a myriad of elements that must be considered when contemplating passing the business on to the next generation if it is to be successful and avoid falling into the storied “66 percent failure rate” of family business transitions.
It can involve money, family, the business, ownership, siblings, employees, customers, taxes, estate planning, life planning, timing, and how much and what kind of help to get for each. Not to mention emotions and feelings.
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It is a wonder everyone doesn’t throw their hands up in the air and yell, “Let’s just sell!” But then selling for the wrong reasons can haunt you for the rest of your life, and those of many others.
Let’s say that the future is bright for the industry, you are positioned well, and you have some – or at least one – next-generation family members who appear interested and capable. What to do now?
No one is ever entirely sure that the next-generation family member “has what it takes” to be successful running the business in the future. Indeed, they are never perfect. And they will have their own style.
But the first step in the process is when you believe they have the potential to be successful leading the company, and they have expressed an interest and desire make a career at the family business, then it is time to sit down and have a conversation.
Talk about what it takes at a fundamental level to be successful in taking over a business:
• Sufficient understanding of the business and all its elements and to be able to see how to make a profit.
• The ability to work with people successfully.
Then offer to work together and put a plan in place for the new owner to become successful. Along the way, don’t be afraid of being in the awkward position of saying they are not doing something the way it should be done.
Business owners also are not experts on training people to do their job. So both sides should agree that to give each other the benefit of the doubt.
But at the core, the real purpose is to prevent surprises.
Another key element that helps immensely when evaluating a child in the family business is to have them report to someone else.
What is key here is to, again, sit down with the manager and make sure he or she understands that you are looking for an honest evaluation, the good and the bad. And he or she should not feel uncomfortable or threatened to share negative feedback with you.
This enables the child to be more open-minded about the feedback they receive as there is not “family” element involved.
Talking and planning ahead for the evaluation process, involving non-family members in the process, and making the process as professional as possible can remove a lot of the angst typically associated with reviews.