Turning Over Your Business to Blood (Relations, That Is)By Nina Kaufman, Esq.
Transitioning a business is never easy under the best of circumstances; having a family succession plan is even thornier. After all, you are entrusting your life’s work to people who, years ago, may have (1) stolen your boyfriend (or favorite party dress or Johnny Mathis album), (2) crashed the station wagon while carousing after a high school football game, or (3) been the family egghead who played Etch-A-Sketch at the dinner table and seemed to relate better to the dog.The serious business considerations mixed with family dynamics/emotions can result in a volatile cocktail.
Here’s the goal:to make sure that you, the founder, get the financial security and value you want from turning over your business, while ensuring that the next generation receives a healthy business that will sustain them as they take it forward.
How can you get there?Keep these key issues in mind:
- Know what it’s worth and what it will cost.Be fair and objective, as if you were selling the business to an outsider.Get outside advisors to help you determine the value of your company as it stands now . . . and where there might be room for improvement. Also, there’s bound to be a tax bite somewhere.Make sure you get the right advisors on board so that you’re prepared for what it will be and how it will get paid.
- Know your options and why you’re choosing them.You may want to leave a legacy but you’re not doing anyone any favors if you’re saddling your kids with an albatross (and career path) that they really don’t want for themselves.If you want to leave an enduring mark on the planet (and that’s your reason for turning the business over to family), you may be better off selling the business and using the money to build a hospital wing (or other charitable purpose).Make sure you have a long, deep conversation with your company’s intended heirs to ensure that they have what it takes to truly build the business (and not run it into the ground).
- Know what you want to do with your life.After pouring your blood, sweat, and tears into this company, give some thought to “is there life after business transition?”And if so, what does that life look like?If your idea of transition is handling the company over to your niece but then micromanaging it (and her) like a nudnik mother-in-law, think again.Leave your ego and the desire to be the eminence grise, the power behind the throne, at the door.Better yet, choose another throne to sit yourself on.