Choosing a Successor for Your Family Business

family business, Naperville business law attorneyMaintaining and operating a family-owned business is a dream shared by tens of thousands, if not millions of would-be owners around the country. Many, of course, have already started such businesses as family-owned or family-controlled companies represent about 90 percent of all American businesses and employ 60 percent or more of the labor force.

In my practice as a business law attorney, I have worked closely with many family business owners and I understand they struggles they often face. For many, the toughest decisions involve planning for the company’s future, as selecting the right family member to take over company leadership can be extremely difficult.

Beating the Odds

Approximately nine out of ten family business owners believe that their company will still be family-owned within five years. The statistics, however, suggest otherwise. Only about one in three family-owned businesses remain in the family into a second generation. About 12 percent make it into a third generation, and only about 3 percent survive into the fourth generation or beyond. In many cases, the failures of family business can be linked to one common factor: a lack of intentional succession planning.

Making Good Decisions

In the 1972 Oscar-winning film The Godfather, Al Pacino’s Michael Corleone famously tells his brother, played by James Caan, “It’s not personal, Sonny. It’s strictly business.” While the line has been used and re-used in countless ways since then, the idea is not exactly true in a family-owned company. Every decision you make will feel intensely personal, especially when it comes to selecting the right person to succeed you. You should, however, still choose the person—or people—who have shown that they have the best interests of the business at heart.

For example, if you have three children, but only of them have shown any concern about your company or any interest in being a part of its future, the choice may be relatively easy. But what if all three are involved, but your youngest has demonstrated the most business savvy and compassion for your hired staff while the older two are most interested in continuing to draw a comfortable salary? In that case, your best option may be clear, despite the possibility of some hurt feeling.

Be Aware of Alternatives

While you may want nothing more than to hand your company over to a family member, leaving it in the hands of the wrong person could be extremely costly. If you have worked hard to find a potential successor without results, you may need to consider other options, including selling the business outright or transferring ownership to an unrelated employee who is ready to take on the role. Doing so may also help you preserve family relationships that could be damaged by a destructive business situation.

Seek Professional Guidance

You should not have to make a business succession decision on your own. Contact an experienced Naperville business attorney today to discuss your available options and to learn how to make the best choice for yourself and your company. Call The Gierach Law Firm at 630-756-1160 and put our team to work for you.

 

Sources:

Forbes

Family Business Institute

Milwaukee Journal Sentinel