At some point, all humans must confront their mortality. It is not a topic that is easy or pleasant to discuss, but it must be done—especially if you have built up a business and want to keep control of it in the family. Estate planning involves determining how your wealth and capital will be divided and distributed after you pass away. Such distribution includes not only money and assets but operational and administrative control over your company.
The only way to ensure that your family maintains control over the company you have built from scratch is to develop a robust succession plan. It is never too early to initiate such a plan. Once your enterprise has grown to a certain size and you have identified the individuals in your family you want to assume leadership positions in it, you should start thinking about the future. A lawyer who specializes in Sunshine Coast estate planning can help you.
Factors to Consider in Succession Planning
Here are 7 factors to consider as you develop your plan:
1. Start planning early
You may be in the best shape of your life. You may feel great even as you move through middle age. Do not take this for granted. You could be unexpectedly stricken with illness or be involved in a terrible accident. That is why you should start succession planning early: at least ten years before the time you plan to retire is a good rule of thumb. The longer you spend on succession planning, the smoother the transition is likely to be.
2. Involve your family
If your plan involves members of your family assuming key positions in the company, then you want to have an open and honest discussion with them. You should do it in a way that considers the personal feelings, ambitions, and goals of everyone who will be part of the succession plan. The last thing you want is for your company to be torn apart by jealous rivalries among the family members who run it once you leave.
3. Be realistic in who you select to fill positions
The first thing you must determine is who really wants to be part of the business. It is a bad idea to press any of your family members into working for your company. After you have figured out who wants to lead the company, you should do your utmost to prepare them through a combination of practical experience and schooling. It is always a good idea to send future leaders of your company to business or law school.
The hardest part of this part of the process will be evaluating the skill and capability of each family member. You will need to examine the strengths of all possible successors as objectively as possible and think about what is best for the business.
4. Realize that not everyone should have an equal share
It may not be in the best interest of your business to give your spouse and each of your children an equal share in your company. Management and ownership are two different things. It may be better for the successors you choose to run the business to own more shares in it. This will give them more power to direct the affairs and director of the company. There are ways of leaving the non-participants in company business with enough money to make them comfortable so that they can pursue their own aims and interests.
5. Train your successor and work with them
We learn by doing. No matter how much formal education your perspective has, they will not run the business competently unless they have been in your position. Whoever you have chosen to succeed you, should spend a few years doing your job.
The way this usually works is that three or four years before you retire you can give your successor executive control. That allows them to execute the tasks and make the decisions of an executive—with you in a position of oversight. This is the best way to train them. It will get them used to the job. More importantly, it will get the people they will have to work with used to them.
6. Get outside help with your succession planning
You must ensure that everything is in order when you transfer control. Your successors should not have to deal with any unforeseen challenges to their leadership owing to some technicality. You should seek the assistance of lawyers, accountants, and financial advisors. There are firms that specialize in family business succession planning, who can help facilitate the process of working through your plan. You should not hesitate to enlist their support.
7. When you retire, stay retired
Once you have set a firm date to retire, stick to it. After this point, you should leave the business in the hands of its new executives. Interference in the affairs of the company after your children have assumed control will only cause trouble at home and in the business itself.
Getting Your Succession Plan Right
You have worked hard to build up your business. You have created an enterprise that you can be proud of. Getting your family succession plan right is not only about your legacy; it is also about the many people who depend on your company for their livelihoods. You want to ensure that they work under the most effective and competent management team you can put together.
If you want to pass your family business on to the next generation, you should begin your succession planning now. A sound succession plan will ensure that you have the funds needed to retire and that the business will continue to grow and prosper after it is handed to the next generation.
Working with lawyers and advisors who specialize in succession planning will allow you to work through the many difficult decisions you will have to make. Their experience and expertise will prove valuable to you as your mentor, groom, and train the people who will succeed you and your senior management team. You should call an estate planning lawyer today for a free consultation.