As you’ve built your business over the years or decades, your fondest dream has been that your children will one day take over to continue your legacy. Now you are ready to retire, but they’re far from ready to lead.
Uh oh.
Is this really the right fit for your son or daughter? Do they really want to do it? Do you really want them to?
Without open and honest conversations, many families fall into the obligation game; children think they are expected to run the business when they grow up, whether they want to or not, and parents think they owe it to their children to pass it on.
But as you would expect, some adult children’s passion is anywhere but the family business. Those successors aren’t going to be ready to lead for a long time – their hearts just aren’t in it – or they aren’t a right fit.
And some parents realize deep down that their children would be better served over time in a different career than their own.
Assuming the children want to run it badly enough and you want them to run it badly enough, it’s time for another important conversation: the right role for the adult child, based on their strengths and experiences, and the complements that need to exist within the leadership team.
In some companies, the son or daughter is a great visionary and strategic thinker but doesn’t really have the skill sets to manage at a high level (cue the executive team). Or perhaps the adult child is a tremendous manager, but their ability to set the vision and strategy isn’t as strong.
You must figure out the right leadership role for this individual and the development they need to get there. This may include skill gaps that need to be filled in or experiences to put on their plates over the next few years to make sure they are ready.
Likewise, you will want to develop the rest of your management team for their ultimate roles so that the company will be profitable and sustained over time.
You may find that some highly driven and successful employees resent a succession plan that puts a family member they may perceive as less qualified in charge. Talk with them. Acknowledge that you realize they have strong skills and important experience to contribute, and there is a key role for them at the management team level, and you want them to be a part of the ongoing success of the business.
By acknowledging the critical role these employees play in the company’s success, and putting together a compensation package and meaningful work package that shows them they are valued, they are more likely to want to be a part of creating the future. If you create a set of expectations of how employees will work together and build the relationships across the team, you can create a powerful integrated team.
This won’t always work, and high performers may not stay. If your son or daughter is smart, they will replace them with team members who are even smarter than themselves.
It really gets complicated when you have multiple adult children in the business. Even if they all want to be part of the business, you still have the difficult job of discerning who is the right one (if any) to run the business and what roles the others should play. How can they be complementary to each other? How can you structure the ownership model to be fair, whether or not they are at the top?
A fatal flaw in family businesses can be their tendency to approach business decisions first in terms of what’s best for the family. Sacrificing the business’ success to appease complicated family dynamics isn’t good for your family members and it’s not good for business. If the company shuts down, everyone’s out of work, including non-family employees. That’s a lose-lose-lose.
When you can’t figure out how to pass on your company without harming your family or the business, it may be best to sell it to a strategic third party and allocate the return to your adult children. You may even be able to write a provision into the sale documents that allows them to continue to work there, as long as they perform against a set of expectations.
Have the courage to look through the dual lenses of doing right by your business and doing right by your family. It may take require fierce conversations. You may have to make very difficult decisions, and you may ruffle family member or employee feathers – but if you approach it with a long term view of what is truly best for all concerned, in most cases you can create a viable win-win path forward.
Believe me, I get it. Thinking about how and when you will exit your business – and whose hands you’re leaving it in – is daunting. Even if I’ve talked you into starting to plan for the inevitable, it’s still hard to know how to launch this big, lengthy process.
No worries! I’ve got you covered.
The next easiest option would be to sell to one or more key employees who want to own the company. You could do this through an