After years of hard work, being able to hand off the family business to someone who will nurture and preserve its legacy is the ideal outcome for a lot of entrepreneurs.
That said, even if you’re selling or transferring your business to a close family member, there’s a lot that goes into the process – any way you slice it. In this blog post, we’ll touch on some of the big considerations that come with passing on your family business to the next generation.
Get Started Early
Selling or transferring your business to a family member is far from an overnight process. Not only is there a ton of logistics to sort through, but there is also a wide range of emotional and interpersonal elements at play. With that in mind, this type of business transition requires long-term planning and preparation to ensure a seamless handover.
Begin the process early, ideally years before you intend to retire or step back from the business. This gives you ample time to carefully consider what your ideal future looks like and how you would like to get there. It also means you can address any potential challenges or uncertainties that might come up without feeling rushed.
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Stay Clear on Roles & Expectations
As you approach the sale, you’ll want to clearly define the roles and responsibilities of everyone involved with the business, outlining how they stand today and after the change in ownership. Establishing clear expectations helps minimize conflicts and ensures that everyone understands their contribution to the success of the business.
While it may seem odd to create formal rules when dealing with family, it can be a helpful way to ensure everyone understands their responsibilities. If you really want to stay organized, consider creating a business structure or succession plan to outline leadership roles, ownership stakes, and decision-making processes. This can help minimize misunderstandings and miscommunications.
Conflicts Can Happen
In any type of business sale, communication is extremely important. However, it’s arguably even more essential when there’s family involved. Navigating this type of transition can be stressful, and not everyone will agree on every last detail. So, it’s important to have a plan in place for when conflict or miscommunication happens.
If possible, discuss areas or topics where you anticipate conflicts may happen ahead of time. As an example, let’s say the family member that you’re passing the business onto has expressed interest in changing the name but you think it will turn away customers. Proactively having the conversation instead of waiting for it to come up at the 11th hour will make it much easier to find a resolution.
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Stay Flexible
Strong planning and communication are essential to handing off your family business smoothly and easily. That said, it’s important to recognize things don’t always go according to plan. So, as you approach this transition, it’s important to stay flexible – especially when working on a multi-year timeline. Maybe you’ll be able to retire earlier than expected, or perhaps the person you’re planning on selling the business to is no longer interested or able to take on the responsibility.
Keep an open and ongoing dialogue with all family members involved in the transition. If plans change, don’t get discouraged. There are always alternative options for business owners who are succession planning.
Get Help From Professionals
Unfortunately, transferring your business to someone else isn’t as simple as handing off the keys – even in the case of close family. In reality, there are a lot of complex legal, financial, and even emotional considerations to navigate. Therefore, you’ll want to seek guidance from industry professionals who specialize in small business succession planning. This could include lawyers, accountants, and commercial real estate agents depending on your circumstances.
Working With a Business Broker
Regardless of what your business looks like, one of the key players in your sale or transfer will be a commercial real estate agent (also known as a business broker). As a professional expert who specializes in these types of transactions, they’ll be your go-to resource for navigating the process of handing off the family business.
Even when you’re simply selling to a member of the family, there will be a lot of nuanced logistics and legalities to account for. A commercial agent will help you stay on track and ensure the transition is as smooth as possible for everyone involved.
Looking for a commercial real estate professional to guide you through the process of selling or passing on your business? We can help. Send us an email or give us a ring at 416-618-0054 to get started.
