8 things to consider before handing over the family business

By Jane Gentry

For many business owners, the idea of passing the torch to their children is not just a succession plan; it’s a legacy. It’s a way to ensure the fruits of their lifelong labor continue to flourish within the family.

But before you decide to hand over your most valuable asset, there are critical considerations to ensure that the transition benefits both the business and your family’s future.

No. 1 – Assessing Your Child’s Interest and Capability

Gauge if there is genuine interest in the business. Have they shown a consistent desire to be involved, or is it an expectation rather than a passion? It also is essential to assess their capability. Do they have the necessary skills, knowledge and temperament to run the business successfully?

You must realize that while your children have enjoyed working in the business, that doesn’t mean they have the skills or desire to run it. Having a contingency plan in the event they are unwilling or unable to take over the business will ensure that the business continues to thrive.

No. 2 – The Experience Factor

Experience is invaluable. If your children have worked outside the family business, they can bring new perspectives and ideas. If they’ve only worked within the business, ensure they’ve had a chance to take on significant responsibilities and understand the operations fully.

No. 3 – Formal Education and Training

While not always a prerequisite, formal education in business management can provide your children with a solid foundation. Additionally, consider whether they’ve had enough training, both within the business and through external professional development opportunities.

No. 4 – The Dynamics of Family Relationships

Introducing family dynamics into business can be complex. It is crucial to consider how this decision will affect relationships between siblings, spouses and other relatives. Clear communication and defined roles can help prevent conflicts.

No. 5 – Financial Considerations

Will your retirement be funded by the business? If so, how will this transition affect your financial security? It’s also important to consider the financial implications for your child. Will they be purchasing the business or is it a gift? How will this affect their personal finances?

No. 6 – Legal and Succession Planning

A well-structured legal succession plan is vital. This includes updating wills, considering tax implications, and ensuring all legal documents reflect the new ownership structure. It also is wise to have a contingency plan in case your children decide the business isn’t for them.

No. 7 – Preparing the Business for Transition

Before the handover, the business should be in the best possible shape. This means having clear systems, processes and a strong management team in place. The goal is to make the transition as smooth as possible for employees, customers, and suppliers. (Our Acquisition Scorecard may be a valuable tool here)

No. 8 – The Role of the Current Owner Post-Transition

Decide on your role after the transition. Will you be available for guidance and support, or will you step back entirely? It is important to strike a balance that allows your children to feel ownership while knowing they have your support. Handing over your business to your child is a decision that requires careful thought and planning.

It is about more than just keeping the business in the family; it’s about ensuring its continued success and growth and ensuring the success of your child. It can be a complex and emotional process. By considering the desires of your family and what is best for the business’ continued success and growth, you can ensure the business thrives under the new generation while honoring the legacy of the previous one. 

As a featured contributor to E2E Navigator, Jane Gentry shares her insights and tips to help you unlock your full potential. Elevate your career, team, and company to unparalleled heights with guidance from a leading voice in leadership and sales.

Visit www.JaneGentry.com now and take your first step toward reaching your potential.