Small business ownership is usually a family affair. In many cases, some or even all of the employees are made up of relatives of the ownership. This family business set up has its advantages, in that ownership knows and can trust the staff. Also, in cases where the family members either don’t take a paycheck or work only for tips, this can keep payroll costs down.
This may sound like a win-win situation, but no one stays the owner of a business indefinitely. For many family businesses, owners tend to be lackadaisical about their eventual departure because they assume that the next generation will just take over when mom and dad decide to retire. If this isn’t the actual future of your business, then you as an owner have some serious considerations to deal with.
What if the kids decide to take their own path?
It is not uncommon for children to choose a different career than their parents, so although your kids may be dedicated to the business now with you as the owner, it may not be the path they consider when looking long-term.
Sit down with your family and have a very serious discussion about your eventual departure as owner of the business. Ask your children if they really want to own the business themselves. Find out if their passion lies elsewhere.
What if an owner knows that their children are not going to be able to keep the business afloat when they are running it by themselves?
We see this situation from time to time where a very driven and detail-oriented owner hands the business over to their not so driven and terribly disorganized child in the hopes of some kind of retirement. What invariably happens in this situation is the now “retired” parent is forced to stay in a major role within the business in order to keep their other loyal employees in a job and keep all of their years of hard work from going down in flames.
If you feel that your child won’t be able to take on the responsibility, do everyone a favor and tell them upfront that they will not be inheriting the business. It might be better for the legacy of your hard work and for your children if you sell the business and then use some or all of the money to invest in another opportunity where they will have the passion and drive to succeed.
If you have a family business, it is a good idea to address these concerns long before the day you want to hand over the business to someone new. Some other issues you will need to address (like what your lack of payroll will do to the value of your business to buyers) can be found here in “Making the Kids Work For Free: Why the Family Business Looking to Sell Needs to Think Ahead”.
Are you the owner of a family business who is trying to decide what the future of your business should be? Do you have questions about what your options are? Please feel free to leave us a comment or question here, and we will be happy to help.