Small Business Succession to the Next Generation

Passing my small family business down to the next generation took two years of careful thought and planning. Most business owners have worked hard, put in long hours, and probably worked weekends to build a business and insure its stability and profitability. Deciding to step out of the business is a major decision. Seeing the family business succession continue successfully would be gratifying, if not profitable.

Are the Children Qualified to Run the Business?

There are tough questions that need to be answered:

• Are the children qualified to run the business?
• If more than one child is involved, how will the small business be divided?
• Have the children been active in working or running the business?
• Do the children want to run the business?
• Do the children want your continued help in running the business?

A business owner must assess the status of the children involved to assure a smooth transition of ownership and allow the business to continue. Since my small business was a corporation with a Living Trust involved, there were legal steps necessary to transfer ownership and remove responsibility from me.

If the children are neither interested nor qualified, then selling the business might be the best option available. An excellent article at the Kiplinger Letter gives the different ways to pass on a family business and advisable legal tips to make a smooth transition of ownership.

Only one of our children worked for the business and was interested in running it so there were no 'division' problems to address. On the appointed date of my retirement, I sold the business to my son for $1.00 to satisfy legalities. He had asked me to remain as a part-time worker to handle payroll, accounts receivables and accounts payables. I agreed. I would collect a small salary for my work and the company supplemented my Health Insurance payments until I reached the age necessary to receive Medicare insurance.

Watching a New Owner Learn the Ropes

In the ensuing months, business ran as usual. Occasionally I would be asked for my experience or opinion and I would offer my knowledge, always accepting the final decision of the new owner. In a small family business, there is only one boss. It was painful to watch someone else's learning process, especially your own children. My personal suggestion to any parent passing a small business down to the next generation....get away from it.

Five Years After Succession

That small business is now five years into succession by the next generation. This family owned business is 21 years old, providing a service that is needed by the community, and struggling as any other small business in a very bad economy. Hopefully the economy will turn around soon enough to enable it to survive. Whatever the outcome, I do not regret having past the business down to my child. He has done an admirable job in a bad business atmosphere.

Sources:

Kiplinger Letter
Personal Experience

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Dealing with a Disrespectful Employee
Telephone Etiquette in the Office
Staff Meetings - Are They Really Necessary?