Owning a business is a lot of work. You put in years of unpaid overtime, you spend more time away from your family than you want, and you often put unintentional stress on yourself and your loved ones to ensure the business is a success. But you do it all so that your company can benefit you and your family for years to come.
Now, you are closing in on retirement and preparing to transition your children into your position.
It is probably safe to say that your children would happily accept your role and you would probably love to give it to them. You know that the business is successful and you want them to be able to be a big part of that, on an ongoing, permanent basis.
However, you have spent years building the business and you know that it is your retirement strategy. If the business were to fail overnight, like a lot of businesses, you probably don't have the resources behind the family business to support your retirement.
Your business is ultimately the goose that continues to lay the golden egg.
While you hope that your children can maintain your success and push it further, your children don’t have the same experience you do. Maybe your child has played a role in the company or spent some time shadowing you, but they haven’t learned the same lessons that you have and they will always want to try new things.
Don’t get us wrong, trying new things is a great way to build a business. Every business has its innovations. That is what gives companies a competitive edge.
Technology is always advancing and it's important for businesses to be able to take advantage of new technologies and new business practices to continue moving forward.
Even, generally speaking, there are changes, like social media marketing and online brand awareness, that are becoming more and more important for businesses if they want to succeed and grow in modern times. And, whether we want to admit it or not, our children are usually more in tune with these strategies than we are.
The problem is, children often want to take the business in a new direction that has not yet proven successful, and that comes with risk.
As the parent who is depending on the family business’s continued success for your retirement, you are entirely responsible in not wanting to take that risk. The value you have built within your business is going to ensure that you can enjoy your retirement, but if you try something with your business and it doesn't work, it will have a direct impact on your quality of life.
That is why it is so important to plan for these situations.
A useful tool in ensuring your child is ready for the responsibility of taking over your company, while giving them the freedom to implement their ideas, is to implement trial periods.
Like any parent, you don't want your child to simply take over the business overnight, you want them to be prepared and feel confident.
The idea of a trial period is to give your child the opportunity to be in charge and take on your role for a short period of time. Maybe you could take a retirement holiday or just simply step back from the business for a defined period of time so that you can observe what your child is doing.
You wouldn’t be transitioning the business formally or legally. You would simply take a month or so off and see what your child does with the day to day work of the business. If a problem were to develop, you can come back at the end of the trial period and step back into your role to resolve the issue.
The key is to give your children the full responsibility to see what they do with it. After the trial period, you and your children can sit down and develop a strategy for improving their and the company’s likelihood of success. This will ensure that, when the time comes, your child is fully prepared to take on your role and responsibilities.
By taking these important planning steps you can better ensure that the company will continue to grow, your family will be cared for and that you will be able to enjoy your retirement as you have always planned.
To find out more about Business Succession and planning for the future, attend an Estate Planning seminar!
