Flat Fees - Call us today 805-946-1550

Blog

Tips for a Successful Family Business Succession

Posted by Julianna Malis | Jul 07, 2021 | 0 Comments

Fewer than one-third of family businesses survive into the second generation, while only 13 percent make it to the third generation. Here are some tips to beat the odds and help your business live on for generations to come.

The sooner you start the planning process the better

The sooner you start planning for succession, the smoother the transition is likely to be. Beginning the process five years in advance is good and 10 years is even better. In fact, many experts recommend having a succession plan built into the original business plan.

Try to include family members in all discussions about succession

Creating your succession plan on your own and then simply announcing it to the rest of the family is a recipe for disaster. By discussing your thoughts with other members of the family, you'll get an idea of who wants to be part of future operations and who might be interested in pursuing other options.

Don't let your feelings or preconceived expectations cloud your judgement

Many business owners consider their first-born child to be the natural choice for successor. However, you have to ask yourself if this is honestly the wisest option. Maybe your oldest son or daughter isn't committed to the business. Maybe one of your other children is not only extremely interested in running the business but also has the right skill set. Or maybe none of your children possess the drive or the necessary skills, in which case it may be best to sell the business to existing employees or an outside party.

Similarly, you can't lose sight of what is best for the business itself. While giving everyone in the family an equal share of the business might seem like the simplest and fairest approach, it could lead to a host of problems down the road. It may actually be fairer, and smarter, to give the largest share of the business to your successor and find other ways to compensate family members who are not involved in running the business.

Train your successor well

No matter how extensively you plan, you can't expect your successor—or your business—to flourish without adequate training. You should involve your successor in decision-making and share your knowledge of what it takes to run the business effectively at least two years before stepping aside.

About the Author

Julianna Malis

Julianna Malis, Attorney at Law, LL.M (Taxation-Estate Planning) Julianna helps families stop worrying about the ‘what ifs’ in life, and instead prepare for life events through proper estate planning. As the founder of Santa Barbara Estate Planning Law Group, she brings a family-centered approach to planning, with a focus on practical solutions for families and high net worth individuals...

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Contact Us Today

Santa Barbara Estate Planning & Elder Law is committed to answering your questions about Elder Law, Medi-Cal Planning, VA Benefits, Special Needs Planning, Estate Planning, Probate/Trust Administration, Trademarks, and Kids Emergency Planning law issues in California.

We'll gladly discuss your case with you at your convenience. Contact us today to schedule an appointment.

Menu