When it is time to retire, who will take over your business? Your business can provide for your retirement as well as the future of your children and grandchildren if planned and executed correctly.
The All-American dream for most of us is to start our own successful business. We dream of one that will make us rich and provide well for future generations of our family. Of those who succeed and pass the business down through multiple generations, in most cases, careful planning of the hand-off from one generation to the next takes place. While it may seem natural to hand it off to the oldest child when the time comes, the oldest child may not be the best choice or may not even want the business according to David K. Nicholas, a CPA with over thirty years experience specializing in emotional and financial issues of family owned and managed businesses.
The Test Drive
Before you bequeath the business in your mind to anyone, it might be a good idea to have them work in the business. The heir to the throne in your mind just might decide they don’t want to inherit the throne once they try their hand at it. On the other hand, you may discover the business philosophies of your offspring may be vastly different than your own and want to preserve a certain management style or company image. Once the company is handed over these philosophy differences can cause very deep wounds that can destroy a family according to Nicholas.
The Stein Theory
Perhaps the most well known father-son team in the limousine industry is Ron Stein and his son, Brandan Stein. Ron is the CEO and Brandan is the COO of Exclusive Sedan Service Worldwide based in North Hollywood, CA. The company is a recipient of LCT Magazine’s, Operator of the Year award.
Ron has a belief that family values should always come before business plans. This is a sentiment also stated by Nicholas in addressing the two. “There are business matters and there are family matters and the two should always remain separate and distinct”, says Nicholas. Brandan joined the business at the age of seventeen. In his third year with the company, it was apparent to Ron that Brandan had the passion, desire and drive to move the business into a new dimension and eventually take over. The succession plan called for a role reversal to allow Ron a little more free time while still being involved in the operations.
Keeping It Real
No two people are going to manage the exact same way. As far as picking a successor, if there are multiple choices, Nicholas recommends forming a board of directors consisting of family members, financial and legal advisors, long term employees and others you value for their business skills. Let them make an independent decision as to who the successor of the company should be. Nicholas also believes that the adult brain is not fully developed until the age of thirty. “While in some rare cases you might trust someone under the age of thirty to take over the business, as a general rule, you should not consider someone under the age of thirty”. Nicholas also states that there are operational decisions and there are financial decisions to be made and the decision-making processes should always remain separate and never be made based on emotions.