Your family business can be a wonderful gift to your loved ones if and when something happens to you, or it can be a massive burden to them. The difference is all in your planning.
If you plan for what happens to your business if something happens to you and set things up properly so your business can continue without you (or be sold), then it will be the gift that keeps on giving to your family. You’ll leave them with a legacy that shows how much you cared for them.
However, if you haven’t planned for the future of your business if something unexpected happens to you, then it will become the gift that keeps on taking from your family. It will take time, energy, and money and cause years of frustrations as they try to clean up a mess.
Fortunately, you’re reading this article while you still have time to get things right. Here are three things you need to do to ensure your family business creates the future you want for your loved ones.
1. Follow Formalities and Answer Tough Questions
Formalities sounds like such an ugly word—like when your parents made you dress up for special events as a child. It’s uncomfortable and stressful. But the truth is, formalities apply to you as a business owner, and it’s so important to follow them when you have a family business. The reason is simple. Your family is worth it!
Getting the formalities in order means you must take care of your business entity. You need an updated operating agreement that governs the operations of your family business and includes clear terms with any partners. It’s critical that you have this in writing!
You also need to make sure your taxes are up to date, and you need to make it clear who will take over your business and how they’ll take it over if something happens to you.
Ask yourself the following questions:
- Who will be in charge of the daily operations of your business?
- Who will make personnel decisions?
- What is the specific chain of command for decision-making?
- What will happen to your inventory?
- How will existing clients be handled?
- Will partners buy out your family (if there are partners), and if so, how and when?
Taking the time to get the formalities organized and to answer these questions will save your family a significant amount of time and stress. Imagine how they’ll feel dealing with the family business after your gone! Make it easier for them by planning for the worst case scenario today.
A plan is far more useful when your team and your family know about it. Therefore, it’s imperative that you communicate your plan for your business with your team members. Explain the plan so they understand what to do if something happens to you unexpectedly.
You also need to communicate with each of the people named in your plan so they understand what they need to do if something happens to you.
3. Involve the Next Generation
Oftentimes, a successful family business legacy depends on a multi-generational approach to ownership, management, and operations. Involving the next generation is essential to ensure your family business has a chance to turn into a family legacy.
The key is to involve the next generation in the business as early as possible, even if you’re not comfortable or don’t think they’re ready yet. Your goal should be to make them feel included and appreciated.
Remember, if something happens to you, the next generation might need to step up quickly and play important roles in the future of your family business. Don’t wait too long to involve them in it.
It’s worth your time and effort to ensure all of the hard work you’ve invested to build a business survives to support your loved ones long after you’re no longer able to run things. Don’t give them a nightmare mess to clean up. Instead, give them the dream. Start business succession planning today!