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What will happen to the family business?

For many, the idea of a family business conjures up images of quaint store fronts straight out of a Norman Rockwell painting. However, family businesses account for an astonishing 50 percent of the national gross domestic product and businesses controlled by families make up 35 percent of Fortune 500 companies.

Even more surprising is the fact that more than half of small business owners are 50 and older and considering retirement, but less than 30 percent have a written succession plan. Lack of a formal succession plan leaves the future success of the business fraught with uncertainty.

Challenges of keeping it in the family

The family dynamics of today differ greatly than those of even the last few decades. Often, families are less traditional and more complicated. The differing viewpoints between generations add friction to the alignment of family interests and only one third of family businesses transition to the next generation.

While many small business owners assume a child will take over business, the child may have a different dream. Business owners should take into consideration the passions and abilities of potential successors before deciding. Another employee within the organization may be a better fit than an uninterested heir.

The importance of a plan

A well thought out succession plan provides the business with a roadmap for the transition while addressing the goals of the retiring owner. After choosing a successor the business owner needs to begin the transition. The change to new leadership will not happen overnight and business owners need to give their success adequate training and time to take over all the executive duties.

A comprehensive succession plan will set a timetable for the transfer of control to the successor. During this period the successor can begin to take on more responsibility and even make some mistakes while learning the ropes. A prepared successor understands not only the daily duties but the overall breadth and depth of the operation.

Planning for the future

While business succession is most frequently associated with retirement, the goal of a succession plan is to ensure the future of a business should anything happen to the current owner. Remember, businesses with owners cognizant of the need for a successor fare much better in the long run than those underprepared.

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The Johnson Firm, P.C.
2400 Lakeside Blvd.
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Richardson, TX 75082

Phone: 972-587-7545
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