When you started your company it was typical for the next generation to wait in line for taking over the family business. Now day's things are different. Adult children have more career options and small businesses have more resources for succession.
If you have not directly discussed business transition with your children yet then do not make assumptions. Sit down and have a talk about your expectations and your kid's expectations for the future of the business. You would be surprised how often business owners are ready to pass the torch and their successor suddenly says, "I don't want it."
Some heirs come to realize that company leadership is not right for them. Although it might be an unexpected transition, the choice to pass your business in another way might be best for the future of your company and your family. Below are some options for business succession when your heir would like to pursue a different career.
Give your kid ownership, not management
It is common for parents to want to keep the company within the family. You have worked all your life to get to this place so why would you want to give it to a stranger? There are other options. If your son or daughter wants to keep the business in the family but has no interest in managing, then you can give them ownership instead.
This means that your heir could still have some oversight in the company while also profiting. They could remain a board member, offering insight over the years. Then you might be interested in passing on a management role to a trusted colleague or another family member instead.
Don't just give management to the next one in line, give it to the right one
Let's say you have several family members working for your business in different roles. All of them are interested in carrying on the family business except for one: your oldest child. If this is the case then you can choose one or many different successors to manage the company while giving your son or daughter a fair share of the profit.
You could name a niece or nephew or younger sibling as the next business owner. Look for commitment, skills, leadership, and experience traits to find the next best successor. Give your eldest child other assets in return such as investments, real estate, or benefits from life insurance. You could give them non-voting shares of company stock and give the new manager the voting shares. This could be a great way to keep the family involved while appointing a leader or two.
Sell the business
Sometimes if you cannot find an appropriate successor for the business then your best option might be to sell. This could be painful for founders who worked hard to build their business but there is no shame in selling. The proceeds can help support your family far into the future. If you do want to sell your business then try to get your finances in order a few years in advance with the help of an attorney.
Pressuring someone to take the reins of a company that they are not fully invested in could be a recipe for disaster. While these options may not have been part of your original plan, they could forge a successful future for generations. Make sure to start planning today with the help of an attorney to ensure a smooth transition for your business succession.