For an orderly transition to succeed in a typical family business, you, as the business owner, should begin an immediate program of heir conditioning -- involving your heirs in succession planning.
For succession planning to work, it's important for the owner who controls the family business to share his or her dreams for its future. You need to communicate not only with your lawyers and accountants, but with younger family members and your spouse.
It's important that the next generation be included in the process and that they understand what's expected of them. They need to know what their first step should be in case leadership is thrust upon them with little or no warning. They also need to know what growth pattern is expected of them as the older generation ages and approaches retirement.
We recommend regular meetings of the family business members because that provides a forum for open communication where the older generation can share their hopes and dreams, while encouraging questions and ideas from the younger generation. That's the best way for your heirs to understand what's expected of them in running the business both during your business life, as well as following retirement, incapacity or death.
You're not alone. It's very common for entrepreneurs who have started and grown a family business to want to remain in total control. You just don't want to let go, or even if you do, you may tend to not trust the judgment of the next generation. Knowing how and when to let go is one of the most difficult lessons for the typical family business owner.
In addition, most family business owners ignore the "prudent man rule" which says that it is not prudent to have more than 20 per cent of your assets tied up in one place. It's not uncommon to have as much as 70 to 80 per cent dedicated to your businesses and your home -- two highly non-liquid assets.
It's important for all concerned to understand that succession planning is a complex and continuing process. Like everything in life, timing is everything and now is the right time to start the process and turn on the heir conditioning in your business.
