Matt McBroom, CFP®
Vice President, Client Development Manager
You’ve worked hard and dedicated years to building a successful business. Now, it’s time to consider how and when you will pass on this significant responsibility to the next generation.
For many family business leaders, a key concern is ensuring the rising generation is well-equipped to take over. According to the Harvard Business Review (HBR), research indicates that 25% of failed successions occur because the heir is unprepared.1
This article explores strategies for equipping your family members with the skills and knowledge to lead your business confidently when the time comes.
Treat the Business as an Opportunity
When it comes to passing on your family business, it’s crucial to present it as an opportunity, not an obligation. Rather than exerting too much pressure, this approach can inspire genuine interest in your children or grandchildren. Communicate why running the company is rewarding, but make it clear that you will support your family in whatever they choose to do in life.
Once your child expresses interest, it’s equally important to let them know that succession is earned, not given. It requires building expertise specific to your business and developing the decision-making, communication, creativity, critical thinking, and relationship-building skills to take on the reins effectively.
Provide Internship and Mentoring Experiences
The earlier you get your children involved, the more comfortable they will be. Start with company picnics and other events that bring together your employees and their families. Once they are older—and express interest in different facets of the business—family members can take part in formal internships or shadowing programs to gain on-the-job experience.
Although having your child work directly with you may be tempting, consider introducing trusted mentors who can help identify strengths and weaknesses and offer objective guidance. Not only can this provide a valuable outside perspective, it may also help counteract perceptions of favoritism or nepotism in the eyes of your employees.
Share the Foundations of Your Business
It’s vital that the rising generation understands the history, values, and strategies that underpin your business to be effective stewards of it. As mentioned above, this is something that you can initiate early on with your children and grandchildren. Although formal and focused conversations can be helpful as they get older, sprinkling insights into conversations more organically at home or work can also be impactful. Key topics to cover include:
- How to balance risk, stability, and growth
- The core values, culture, and mission of your business
- The ethos that informs your decision-making, strategy, and leadership
- The responsibility of providing a livelihood for employees
- Key successes and challenges—including what was learned
- How to balance risk, stability, and growth
Final Thoughts
Proactive planning is essential to successfully preparing the next generation to take over your business. Often, this starts with solidifying long-term goals for your company, your family, and your legacy.
Aaron Wealth Advisors understands the many emotions and complexities involved in this process. Our team can work closely with you, your estate planning attorneys and tax specialists to develop a comprehensive plan to smoothly transfer your business, safeguard wealth, and create a legacy for generations to come. Let’s connect today.
Sources
1 https://hbr.org/2022/09/plan-a-smooth-succession-for-your-family-business
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