You Inherited the Family Business… Now What?
The baton is passed; the papers are signed; the nameplate on the door has been changed. The family business is now your business, and what you do with it over the next few months will help chart its course for generations to come.
In an ideal situation, you’ve had plenty of exposure to the business and the transition has been in the works for three to five years, with fully developed plans, discussions and analysis that have helped you identify and rectify any potential issues. When I was managing my father’s business as a young man, he made sure I knew our bankers, accountants and other key partners. Over time, I developed relationships with clients and employees so when and if a transition came, it would be seamless. We also had the proper amount of insurance and estate documents established and would review those regularly. Sometimes this preparation is not possible, however, as every situation is different.
Regardless of the circumstances or whether the succession was planned or unexpected, the business is yours now, and it’s important to connect or re-connect with a team of advisors right away.
Start by gathering the company’s current advisors, including bankers, attorneys, accountants and wealth planners. Also, consider bringing in your own advisors who can offer a fresh set of eyes and ideas as well as look after your best interests as the new owner. In addition to the business’ short-term and long-term goals, you will want to discuss your personal goals, including your role, with your team. Having an open conversation will help you determine the right path for success.
When you initially meet with your advisors, you will want to review various documents, including:
- Tax returns and bank statements.
- Business and personal insurance packages.
- Letters of incorporation, registrations and trademarks.
- Any applicable licenses.
- Balance sheet.
- Current budget.
- Current business plan.
- Documentation for loans, lines of credit, mortgages and any other forms of debt.
If you weren’t previously immersed in the business, this process will shed light on the current state of the company. If you have been active in company management or operations, this review can serve as an opportunity to discuss any concerns or ideas for change.
Additionally, you will want to discuss the legal, financial and tax implications of the transition, as well as any family or outside dynamics that should be addressed, including multiple owners, shareholders or disputes about the succession. Your outside team can help you navigate conflict resolution and other complex issues, mitigating risk for you and your business.
After these important foundational meetings with your advisors your next priority should be your employees and customers.
With the change in business ownership, your employees may be nervous about what this means for them. Don’t make promises you can’t keep. Be honest that you are excited about the transition, that you are digging into the details of the business, that you are evaluating next steps and that you will keep communications channels open. Set time aside to meet with key stakeholders and department representatives to understand what they believe are the company’s current strengths as well as opportunities for improvement and growth.
You may be tempted to shake things up and reshape the business to make it your own. While thoughtful evaluation is needed, be mindful of the company’s history, brand and family legacy, and avoid making too many changes too soon. If you do decide to make major changes or modifications to items such as staffing or strategy keep your team of advisors informed, as they are critical partners in growing and sustaining the business.
Your business plan is your next area of focus.
According to the Family Business Institute, approximately 30 percent of family businesses survive into the second generation and the likelihood of survival greatly diminishes for generations beyond. A strong business plan is essential if you want to be one of the companies that last. Again, consult your advisors, and while you’re at it, you may want to create your own succession plan.
While the biggest challenges of your business transition will take place early on, it’s important to meet regularly with your banker and other advisors to address changing business needs as well as customer needs and market conditions. The more time and planning you dedicate to your business now, the better off your company will be for the next generations of family owners.
Image Credit: http://witzkeberry.com
Powered by WPeMatico