Passing control in a family business can be difficult with all the challenges families and businesses face separately. You may be confident in your own ability to keep your business on top, but how confident are you in its success when you are gone? With careful thought and planning, the torch can be passed and carried by many successive generations.
Developing a mission statement for the business is your first step. This statement covers your business’ values, as well as your family’s beliefs.
A comprehensive mission statement should incorporate the objectives and expectations of each family member. Determine if your children want to actively participate in the family business or pursue outside opportunities. Perhaps you want your children to possess their own real-world experience before coming into the business.
Detailed communication with the family is vital before any planning takes place. The focus should then turn to education.
Family businesses need to put a premium on education for the next generation. That doesn’t necessarily mean formal education; it can simply mean close familiarity with the family business.
Given a successful business plan, an introduction to the values and mission of the business, and a strategy for maintaining the family dynamic, the next leaders should be well-equipped to take the reins. The final question is when to let go. This is where a forward-looking governance plan comes in.
Adult children are likely used to their parents making decisions about the company. The parents, who are likewise used to being in charge, may also be reluctant to relinquish control. A transitional approach will enhance the governance of the business and alleviate many concerns. Another way to develop the next generation in the area of governance is to establish structures, such as family councils or advisory boards.
Ensuring that your business endures requires much more than a great business model. Don’t make the mistake of spending so much time and energy building your business that you overlook planning for its future. Make sure you keep great management all in the family.
-Jennifer Stillman is a banker at J.P. Morgan Private Bank in Milwaukee.