Three Family Business Succession Planning Questions

The owner of a family business, much like a parent, is part teacher. "In order for a business to thrive into a new generation, philosophies, business practices and experiences must be passed along to employees. And if the employees are also the owner’s children, the legacy of the family business becomes fully intertwined with the family’s own heritage...

In successful succession planning, an owner must totally divorce him or herself from family issues and keep a firm grip on the main objective: preserving the business. The process begins by finding the answers to three very important questions:

1. Who? Consider first who might be best suited for the job before factoring in any emotional issues. If only family members are considered, for example, look first to see who has the most aptitude and interest. If a surviving spouse would be considered, how active has he or she been in the business? Are there key employees or non-family members to consider?

2. When? Does the owner plan to retire or does he or she simply want to prepare for disability or death? Does the owner want to gradually cut back on any or all aspects of the business?

3. How? Is a steady stream of income needed to fund retirement? Can the new owner or owners finance the transfer?

From this edition of Northeastern University's Family Business Quarterly