Do you own a family business that you want to pass on to your next generation? But are you sure your children are interested in taking over your business? Will they make it profitable for the long term? Generally, parents treat their company as their baby with utmost care and love and when they pass it on to new hands they have a fear of failure. But why should they fear failure? Instead of that they should be careful enough during the deals.
Over the next few decades , few millions of wealth are expected to be transferred to new hands of generations from the aging business owners. Even with COVID-19 putting a dent into some of their wealth and changing more than a few succession plans, the amount of wealth transfer is still overwhelming. Apparently, the pandemic changed the business landscape forever but the business will bounce back as the time passes by.
However, many owners are not good at succession planning. Per entrepreneurs surveyed, almost half of family owned businesses do not have any succession plan. 2 out of 3 of those businesses, plan to pass on their ownership to the following generation. The facts show that only about one-third of all the family businesses survive into the next generation and even fewer succeed to survive into the third generation even before the COVID-19 pandemic.
Are you also concerned about how to make your business transition smoother? Then we at Foster Financial have brought you some of the expert recommendations to help you make a smoother and successful business transition.
There are numerous obstacles and hurdles when it comes to family business succession, but not all problems are unsolvable. Having even a little bit of positive thinking can ease the successive generation’s leadership of any family company. Here is what we recommend family business owners for a smoother transition:
●You need to understand and accept that the process will take a significant amount of time. The sooner you discuss the future of your business, the better and smoother will be the process. Begin early with your family members and involve professional advisors in the process like attorneys and accountants about the business transition and personal financial matters. Remember such decisions need ample time which may be even one or more years.
●Be familiar with the good differences. You need to understand that the next generation will not be able to take up and handle the business the way you and your earlier generation did. Your next generation may have different and advanced skills and interests which can help in enhancing your business operations effectively. You need to be familiar with these differences and trust the process.
●A successful succession plan is the one that covers the transfer of power and the transfer of assets. Attention to detail is essential to make certain the buyer, even when they are your family member, has approved financing or cash to acquire a business.
●Honoring the family business’s reputation. Family businesses have often been built with heart, sweat, and tears as parent owners spend years to build a brand that is liked and trusted by their customers. Therefore, anyone succeeding as an owner must recognize the long haul reputation of the business and honor its reputation.
Want to know more? Contact us today.
Tax Tips for the Self-Employed – Foster Financial
6 Benefits of Having a CPA on Retainer
Brand Awareness and Your Small Business
5 Steps You Must Take for Small Business Growth
What is a Tax Planning Strategy?