When the time comes to make this decision, there are three overarching questions that need to be addressed. By thinking these through, you can come to an intelligent, well-reasoned answer that works best for your business and your family.
- Do I want my child to take over the business? This first question is mostly a matter of legacy--do you think of your business as a “family” business, where you want to keep leadership and ownership in the family (or are you just defaulting to this option)? Are you making this decision because you want to give your child a healthy and stable future, and if so, are there other ways you could do that (such as trusts, board membership, or stable non-leadership roles)? If you don’t want your child to take over, then there needs to be communication about that so everyone is on the same page.
- Does my child want to take over the business from me? Conversely, it’s unhealthy to simply assume your child wants to take over the business. Even if they’re already working for the company (but especially if they aren’t), the added burden of ownership/leadership may not be appealing to them, or the industry you’re in may not hold interest to your child as a long-term career path. While hearing that your child does not want to follow in your footsteps and take over the business can initially feel a bit hurtful, an honest dialogue about their future will help prevent the future pain of pent-up resentment between family members.
- Does it make sense for my child to take over the business? Lastly, you must take a moment to answer honestly: Is your child the right person for the job? In many cases, the answer may be “yes”: Children of entrepreneurs often soak up the skills needed to run a business successfully, and being family can mean that your child has internalized your values more than almost any outsider could. However, this is not a given. Running a business successfully is a talent that’s relatively rare, and there’s a very real chance that your child’s specific skills fit best in other roles. In these scenarios, you would be doing your child a kindness by allowing them to flourish elsewhere rather than shoehorning them into a role where they may fail themselves or fail the company.
If you (and your child) decide a role in the company is a good fit for them and the business, there must be a career and development plan in place. This is an essential investment in leadership that will help your child to succeed and grow in their new position and your business to succeed under direction of the next generation. This is also the time for the senior generation to have a plan about their transition and future in the business. “Letting go” of the company is a terribly difficult family business issue, but the senior generation doesn’t need to completely abandon their company; he or she simply needs to change their job description and become the designer to help develop the new system for leadership and governance. For example, they may become a chairman of the board, provide counsel for new leadership, or enter another role entirely (with their adult child’s input). This is what Hubler calls “The Last Challenge of Entrepreneurship”.
What if (my) children aren’t the future (of my company)?
For more advice on passing on your business to your children (or others), pick up The Soul of the Family Business by Tom Hubler. Through personal anecdotes, real-world case studies, useful tools and frameworks, and more, Hubler offers an in-depth look at how entrepreneurs can build succession plans that support both their families’ happiness as well as their businesses’ future success. You can pick up The Soul of the Family Business, available in hardcover form on Amazon.com, directly through Itasca Books, or at a bookstore near you. And of course, if you’re ready to take the next steps, you can always contact Hubler for Business Families today.