Be careful when planning to sell your business to family
A lot of business owners have often dreamt about passing the torch to their kid(s). It is heartwarming to watch your offspring follow in your footsteps and continue your legacy. However, contrary to this idea, most family firms fail at succession planning. Perhaps it’s the laissez-faire attitude of thinking that there won’t be any legal, financial, employee, or cultural ramifications to poor planning. But did you know that most family firms fail to successfully transition to the next-of-kin? Therefore, planning to pass the business to a family member still requires a lot of attention and foresight.
If this is your goal – to pass the business to a family member – you shouldn’t give up. There is research available that suggests nonfamily employees prefer family successors to outsiders because of the family-like culture it fosters. The key is to gain buy-in from nonfamily employees early and over time. But how to do this? Let’s start by asking some of these questions:
Will nonfamily employees view this as blatant nepotism?
Will hiring your family undermine other employees’ commitment to the business?
Is your family member suitable for the role, backed by education and experience?
If your employees were to interview your family member, would they hire them?
Next, you will want to integrate the successor into the business to create familiarity with the team and foster a family-like culture amongst everyone. You may also consider having your nonfamily employees as part of the process by providing training to their future boss. Lastly, raise the bar for your family employees to ensure that they are accountable at a high standard and aren’t allowed to slack off or enjoy the perks of ownership until they’ve earnt it. Remember, the success of any transition is heavily weighted towards culture change management.
Succession Planning for Business Owners.
Article references:
https://hbr.org/2012/01/avoid-the-traps-that-can-destroy-family-businesses
https://hbr.org/2020/05/the-key-to-successful-succession-planning-for-family-businesses
https://journals.sagepub.com/doi/full/10.1177/0894486517734683