The greatest enterprises of today have lasted across multiple generations. However, it takes more than a good business to make for a smooth succession. Countless companies fail to make their way down the generational chain, and there are a number of recurring reasons for this.
Internal Conflicts
Like many aspects of estate planning, business succession can be a volatile process. Outright conflicts between family members over control and ownership are not uncommon, but even without these, subtler issues can arise. Mistrust and poor communication are two common examples. The business is also bound to have trouble transitioning if the incumbent owner is resistant to contemplating the inevitability of retiring or the possibility of his or her death, thus failing to plan ahead or remain open to the idea of new ownership and management. It’s important to view the advent of succession as realistically and practically as possible.
Problems with Selection of Successors
Two issues that are particularly prone to arise are unqualified successors or those with little interest in taking the helm of the family business. In some cases, family members who have been with the company for many years will be chosen as successors even if they may not fit the role or be prepared for the responsibility. Meanwhile, if personal interest in the business hasn’t been fostered from an early age, they may be absent when it comes time to pass the torch. It’s also crucial that you account for the fact that arranging for new ownership and appointing new management should each be treated as different processes with their own needs.
Lack of a Succession Plan
Perhaps the most significant and most preventable root cause of failure to sustain the business intergenerationally is a lack of preparation. In fact, a considerable portion of family businesses don’t have succession plans in place at all. Not only should these plans begin to develop early and be closely integrated with estate planning, they should be designed and implemented with the help of professionals. Even if you plan to simply sell the business, you’ll need to recognize the role of succession in determining its value, regardless of whether or not the new owners will be family. Don’t leave the fate of your company to any amount of chance!
Your business is one of the most crucial assets in your estate, so no estate plan for a business owner should be without a sharp succession plan. To find out how we can help to keep your business standing strong for generations to come, call 1-833-266-6464 for a free consultation.