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email:WSBDC@uwyo.edu

Succession Planning for Family-Owned Businesses

 

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Of the nearly 19 million U.S. family-owned businesses, only 30 percent of those family-run companies today succeed into the second generation and even a smaller 15 percent survive into the third generation.  The reason, according to many experts, is the lack of an orderly succession plan.  Wyoming SBDC counselors can help you understand and manage these issues to assist with a smooth ownership transition between you and the future owners of your company.  With succession planning for family-owned businesses can be especially complicated because of the relationships, emotions involved, and because most people are not comfortable discussing topics such as aging, death, and their financial affairs.

 

What you can do with Succession Planning

Think about the future and who will run your business when you retire or are no longer able to run the business yourself.  If you own a family business and want to pass on the business to family members when you retire, it is important for you to develop a thoughtful succession plan. You will need to consider who is going to manage the business when you no longer work in the business and how ownership will be transferred.

 

You can get some ideas about family dynamics and how they might play a role in your succession plans.  Who might have the personality and characteristics that are needed for the business to be successful?  You may need time to develop those skills or abilities if they do not exist.

 

Questions need to be answered to make the transition work.  What is the time frame for the owner to step down?  How much will the owner need to be able to retire?  What is the value of the business?

 

If the value of the company will not support the financial needs of the owner, can the business improve its earnings enough to demand a higher price?  How will your retirement funds be paid? How do you deal with family members that are not involved in the business? 

 

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