You have determined that a successor to your business exists and passing it on to a family member or individual sounds attractive. If that sounds like you the first thing you need to do is sit down today and ask that person the question “Do you want to run this business?” You may think you know the answer, but make sure before you blithely roll towards retirement only to discover that your heir apparent is not interested in taking over. We’ve seen it in consulting: an owner well past retirement age with no one to step into his or her role because s/he assumed that his daughter/son/vice president wanted to take over. But they don’t. They are happy to work there, they don’t want to run the organization. Furthermore, they are not capable of running the organization. Now what?
If you ask point blank whether they want to run the company and the answer is “No” or is clearly equivocal, it’s time to start looking for a new heir(ess) or considering other options.
If you asked the question and got an enthusiastic positive reply, start training that individual now. Knowing how the business runs and how to run the business are vastly different and both of you will benefit from a long term, gradual hand over of responsibilities. It will also calm the fears of employees, customers and other stakeholders if they see a planned, orderly transition in process.
A key to the success of any business are the relationships which have been built over time with customers, suppliers, lenders and others. A successor needs time to build confidence in those connections and make them his or her own.
As a first step meet with experts in the field to ensure an orderly hand over and avoid tax liabilities.
In the case of a family business a whole range of other issues may cloud the an otherwise simple transition. Son has worked in the business but left. Nephew runs a second location efficiently but has unfortunate personality quirks. Best option is a daughter who has never worked in the business but is a rising star in another company. How do you navigate the familial problems and arrive at the best choice without creating a family and/or business crisis? There is no good answer but if you don’t deal with the situation your heirs will be left to figure it out on their own.
The key point is begin now. Don’t wait until you are ready to retire – that’s too late to create and install an effective succession plan.