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Succession Planning For Small Businesses
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Article 5: Keeping It In The Family
Many closely held business owners’ primary succession goal is to keep the business in the family. Doing so, however, requires careful planning years in advance of the owner’s planned exit from the business.
“There are many reasons you might choose to pass your business to the next generation in your family,” says David Geller, principal of GV Financial Advisors in Atlanta, Ga., a financial planning firm that specializes in working with private and family business owners. “The most obvious one is if you have children who have the skills and desires to take the reins. Another is family financial security.”
Keeping the business in the family can also help ensure your retirement income, Geller notes.
“You may be able to stay active in the business and help contribute to its ongoing success after you retire.”
There can be complications, however, when passing on a family business to the next generation. For example, will children be hurt or offended if they are not tapped for leadership? Are there possible conflicts over job and reporting responsibilities and compensation? And do children even want to assume leadership responsibilities?
“These issues only escalate when extended family members are involved,” Geller adds.
If you’ve decided to pass your business on to your children, Geller says you owe it to yourself and your heirs to do at least three things:
- Make sure your succession plan will enable you to achieve your own financial security, regardless of how well the business does after you leave.
- Place your children in positions of increasing responsibility and empower them to make important decisions — and learn and grow by making their own mistakes.
- Consider the relationships between you, your spouse and your children, and your children’s relationships with each other, and how all of these dynamics will come into play in running the business.
“An objective outsider — preferably a family business consultant or other professional advisor — can help you achieve a smooth, profitable family business succession,” says Geller. “These outside advisors can bring forth issues that would otherwise be hard to discuss, and can help keep potential conflicts from getting out of hand.”
Finally, be sure to document and pass on to your children the core values that you’ve used to govern how you run the business. These will provide an invaluable guide to help them deal with challenges and, ultimately, the passing of the business on to the following generation.
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Succession Planning For Small Businesses
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