In a recent article, retail CEO Jack Mitchell outlined the following 8 tips to assist a family business in successfully transitioning from one generation to the next:
- Passion to Pass the Torch. In order to successfully transition the business to the younger generation both generations must embrace the idea of a shift in the equity and responsibility of the business.
- Ask for Help. Use outside resources such as advisory boards and networking groups comprised of other family owned businesses to assist with strategic issues.
- The Five Year Rule. Require the younger generation to work outside the family business after college. This allows family members to gain outside experience and perspective that can be utilized by the business.
- No Guarantees. Qualifications matter. The bottom line is that you are running a business and qualifications for any particular position are more important than the applicants last name.
- Pass the Equity Early. Give significant amounts equity to future generations at an early age. This establishes trust and promotes responsibly and accountability among members of the younger generations.
- Provide Financial Security to the Senior Generation. Make sure the succession plan allows the older generation to retire with sufficient assets outside the business to ensure that money is not the reason members of the older generation stay involved with the business.
- Communicate. Allow family members to be candid and transparent among one another. Schedule regular meetings when issues can be discussed on a confidential and family-wide basis.
- Have Fun. It can’t all be work so take time to play. Take advantage of spending time with family members and enjoy each others company.
If you would like to discuss issues facing your family-owned business, please contact our Business Law Group partner, David A. Closson at [email protected].