The CST Group works with family-owned businesses to prepare for transitions in all stages of the business life cycle. Regardless of the industry, all successful family-owned businesses face changes in leadership and require a carefully strategized succession plan.

If you run a family business, sooner or later you will need to “pass the baton” to the next generation.  Doing so without a firm succession plan dramatically decreases your business’s chances of continued success. In fact, one recent survey demonstrated that less than 30% of family businesses survive into a second generation. To avoid this common pitfall, keep these suggestions for family business succession planning in mind:

  • Establish strict rules for hiring family members. Any job candidates who are family members should have to undergo rigorous vetting, just like an external candidate. Each open position should have a job description and qualifications that candidates have to fulfill, regardless of their familial relationship.
  • Set up family meetings. Establish a regular schedule and require attendance from all family members who are currently involved in the business as well as those who hope to be involved in the future. Assign someone as the note-taker, and be honest in your discussions. While you lay out your vision of the future, allow younger family members to express their own goals.
  • Once a successor has been selected, begin an apprenticeship early. Teach your successor the ropes so he or she can gain the technical expertise and skills needed to lead the company. You should also have an evaluation plan in place to measure progress and implement performance improvement plans when necessary.
  • If you would like to avoid personally designating a successor, consider relying on an independent board or a business advisor. Unbiased advisors can help choose and train a successor, with decreased likelihood of interpersonal conflict.
  • Maximize potential tax benefits by consulting with a professional. An experienced CPA may be able to help you transfer business interests without suffering serious tax consequences.

Handing the family business down to the next generation can be a stressful and chaotic process. Business owners do not want to see their hard-earned business go off course, nor do they want to jeopardize important family relationships. A carefully thought-out succession plan can help your family overcome personal and professional hurdles and quickly return to focusing on your business.

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The information contained in the Knowledge Center is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. In no event will CST or its partners, employees or agents, be liable to you or anyone else for any decision made or action taken in reliance on the information in this Knowledge Center or for any consequential, special or similar damages, even if advised of the possibility of such damages.