Owning a business is tricky. Owning a family business is even trickier. Why? Because often, family-operated businesses tend to assume that everyone is on the same page when it comes to day-to-day involvement. Making the issue even thornier, family business owners often fail to prioritize the legal and financial aspects of protecting their businesses. If you’re planning on growing your business through the next generation, these tips are vital for success.
Business owners get caught up in the minutiae of daily tasks, and it can be easy to forget the vital details of securing a business for the next generation. As you consider the success and succession of your business, take the time to fill the holes in your plan. Planning, people and provisions for success are critical elements in every succession plan. Here are four easy steps family business owners can take to cultivate success now and through the next generation:
- Create a board of advisors that consists of non-family members such as your lawyer, accountant, banker and any business owner whom you may know and respect. Meet annually to review the business and its operations. This is an effective way to get invaluable advice on decisions that cannot be mired due to familial relationships. This also provides outside expertise in areas that may prove beneficial to the growth of the company.
- Identify skills and define roles amongst working family members so that every working person is placed in the position that will most benefit the company. This step is often overlooked when family is involved. Create a description of each role to share with those involved, as well as your advisor board.
- Legally document the formalized business agreement and succession plan. If the business or family experiences a loss, nothing will prove more important. As the founder or CEO of a family business, it is up to you to make sure that partnership agreements and a buy/sell agreement are signed and notarized. A succession plan includes celebrating success and getting documents in order to guide the transition process, but also includes planning, people and provision for continued success and longevity.
- Enjoy working together and look for the strengths in one another. Remember why and how the business was started. There is no better way to create a shared vision and value system for generations than to run a family business.
Failing to plan is the forerunner of planning to fail. Take the next step; begin planning your success and succession.
Dr. Betty Uribe, Executive Vice President, California Bank & Trust