NFIB

Transitioning Your Family Business to the Next Generation
03/ 12/ 2003

by Vicki Gerson

When you own a family business, the natural assumption is that one day your children or another family member will take over. But don’t expect them to just walk in and take over when you’re ready to retire. The process of handing down the family business is a long one, and how well you do it will determine the future success of your business.

Does this person really want the business?

Is your child coming into the family business because he or she can’t decide on a career? Is the young adult entering the business because he or she has failed out of college? Have they had trouble finding or keeping another job? Is your son or daughter coming into the business because they feel pressured to do so?

If you answer yes to any of these four questions, reconsider whether it is a good idea for your child to enter the business. The younger generation should only join the family business because they want to - not because there is no other choice. In addition, they should have something to offer the business.

Allow your children to get to know the business.

The earlier you can familiarize your children with the business the better. When your children are old enough to have summer or after-school jobs, encourage them to work at your business. This will allow them to see how your company is run and gives them a chance to get to know your employees. Once again, if your child would rather gain work experience outside the family business, don’t insist that they come to work for you. You’re better off with employees who really want the job, family members or not.

Define your children's job duties.

Whether they are working in the business full or part time, specifically decide what roles your children will play in the company. Make sure you monitor their job progress the same as you would your other employees. If they show up late every day, they should receive the same disciplinary action their co-workers would. On the other hand, realize that they will make mistakes and don’t be harder on them than you would be on your other employees.

While turning over the reins....

It is important that you don’t spend your days looking over your children’s shoulders to see if they are making mistakes or doing things differently than you would. They must have some power and responsibility or your other employees won’t respect them. Find something to do that doesn’t interfere with their job responsibilities. You could go out and renew personal relationships with customers or actually find time to golf once a week like you’ve dreamed of doing. It will also be easier to turn over the business to your heir if you have developed a realistic timetable for the transition.

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