How to Pass my Business to my Children?
Will the next family business generation survive?
In a generation that has been labeled as the “me” generation, Meridian has seen men and women in the family businesses we serve who:
- Care about long-term employees (who often had known them since diaper days!)
- Are willing to put in tremendously hard work into the family business but also care about their own growing families and don’t want to sacrifice them for work success
- Care deeply about their parents’ well-being and retirement – in fact, pleasing their parents is still paramount to how they view themselves
If this group is representative of the next generation of family business, be highly encouraged!
So as a person likely in the generation currently running your business, what can you do to ensure passing your business to the next generation will be successful? Try these seven steps:
1. Require outside work
While your next gen can be successful without working outside the family firm, it is clear that those who have worked elsewhere have both an appreciation and an edge when they come back into the family business. If your next gen is already working in the family business without the benefit of a prior job, allow them to visit other, non-competing owners (Meridian can help match them up if needed – reach us at meridian@askmeridian.com). When transferring a family business to the next generation, they will need this edge to keep the business successful!
2. Optimize strengths
Not everyone is like you (thank goodness!) so be sure to accurately assess what your next gen’s talents are and match them to their assignments. If you are a numbers person, and they are a creative genius, their leadership role will look very different from yours and a mutual respect for God-given talents must prevail for success. This will ensure that when you transfer the business to your next generation, they feel confident in their ability to take on the challenge.
3. Provide training
Learning in-house systems, processes, and people is a given, but outside education like Meridian and industry events for different perspectives will enhance and catapult their skill sets. Most of the next gens we work with have expressed a strong desire for knowing the training path their parents wanted, and the ones already in our monthly one-on-one coaching/mentoring time clearly have an edge.
4. Listen
Set aside 30 minutes weekly just to touch base with your next gen and listen to their ideas and frustrations. Not doing this is one of the biggest mistakes we see when owners are passing their business to the next generation, leaving their successor feeling unheard and unappreciated.
5. Segregate employment from ownership
Many next gens who have jobs and salaries in the business have no clear idea of how to progress in the company, if and when there would be an ownership transition, and how funding would work. They tend to co-mingle the two in their minds when they should be separate issues! When transferring a family business, ensuring your next generation understands what their future looks like will help them to feel better prepared.
6. Segregate your communication
Parent, boss, and co-owner are different roles. Don’t carry on business talk at family recreational gatherings! In other words, save your boss lectures for in the office and save your parenting discussions for outside the office. Be clear which role you are speaking from by identifying it for your child before you proceed. It can be as easy as saying, “I am speaking as your Father when I say this…” or “As Co-Owner of the business, I think…” It might not be easy at first, but adding these types of phrases to your conversations will quickly become a habit that reduces unnecessary stress and confusion between you and your next generation leadership.
7. Express faith and constantly encourage
Just because your parent might have thrown you in and you made it, doesn’t make this is the right way to transfer a family business to the next generation. Your next gens need some kind words, hearing you have faith in them, and encouragement. Many next gens have expressed needing at a minimum 4 positives to one negative to keep their enthusiasm. If all you do is criticize, they won’t want to stay! Try the sandwich approach when you have constructive criticism for them: start with a positive about the subject, mention your criticism, and end with another positive. For example, if you notice your next gen straying from the company vision, you might say, “I am impressed by your new ideas for the company, however I noticed that your recent suggestion doesn’t fully line up with our values. I am confident that you will be able to use your skills to revise this great idea using our values as a framework.”
We are excited about what the next generation will bring to family businesses and where we see it being most powerful is in the customer experience and technology realms. They are smart. They are driven. They crave success. They see the family business surviving multiple future generations. They see diversification. They see hope. And so does Meridian.
We can’t wait to see how the nation’s family companies thrive as the next generation gradually steps into leadership. The family business, whether it stays 100% the same or morphs into new and exciting frontiers, will be alive and well thanks to the amazing enthusiasm, dedication, and creativity already springing forth from the next generation.
When you’re ready to start the process of transferring your family business to the next generation, M-Power™ is the best first step. M-Power™ is a custom system for you to get the results you want without the chaos. It’s built for multigenerational family-owned businesses that know things could run smoother, be more profitable, and transition to the next generation seamlessly. Join family businesses that are making it to the 3rd, 4th, and 5th generations!
The Meridian team works with family-owned businesses to strengthen leadership, improve teams and profit, and prepare for successful generational transitions. Through coaching, consulting, succession planning, valuations, and strategic advisory services, Meridian guides family businesses to build stronger futures.
