If you find yourself inheriting a family business, there are a few steps you can take to ensure the process goes smoothly and the business is on solid footing.
There are plenty of pros and cons that come with inheriting a family business. If you have an entrepreneurial spirit, grew up with a thorough understanding of its products and services and are passionate about the company, you may be excited by the prospect of taking the reins forward into the future. If you always wanted to pursue another career path, however, passing the company down to the next generation, AKA you, may mean putting those dreams on hold and attempting to figure out what to do next.
No matter what your situation looks like, it is possible to make inheriting a family business work for your specific situation. Here’s what you need to keep in mind once the keys have been bestowed to you.
1. Draft a formalized document in writing.
There is a chance you may be the sole heir to the company. But, there is a much bigger chance that other family members, like siblings, will be involved through the succession line. You might have inherited the company, but your relatives may question just how capable you are to run the business.
The best way to avoid unnecessary family squabbles is to draft a formal document that outlines how the company will be run and the relationship each member has to the business. Have each member involved in the business sign a print copy as well. These guidelines should include the following pieces of information:
- The roles and responsibilities of each person involved in the business, defined as clearly as possible.
- Operating procedures.
- An understanding of what the decision making process will look like.
- Compensation, as well as the ownership stakes or shares each member may have in the company.
- How an employee’s job performance will be evaluated.
- Exit plans for family members, should they decide to not be involved.
2. Talk to an outside advisor.
Even if you consider yourself to be pretty business savvy or think your family had everything under control, you may want to look into meeting with an advisor to examine the company from an external standpoint. Speak with partners of the business and the company accountant to get a better understanding of where the business was before you take over. If there are any underlying troubles facing the company, this is the time to develop a strategy for addressing them so they do not carry over into the next generation.
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3. Communicate regularly.
No matter how smoothly it was running before you took charge, inheriting a business requires plenty of upkeep and hard work. After all, it is a business and everyone is expected to pull their fair share. Meet with all involved in the company in-person on a regularly scheduled basis. Use this time to see the
progress being made by the team, brainstorm new, creative ideas and approaches that may benefit the business, and address any issues that might have come up.
4. Kick family drama to the curb.
This is applicable to anyone inheriting a family business, or starting one up. Much like you would leave your personal issues at the door at any professional job you held, do the same when running a business as a family. If you get into a disagreement with a relative, take a break or find a way to calmly reach a resolution together. Remember that at the end of the day, as well as the start of it, family comes first. When you approach running the business with that mindset, it allows you to let the spirit of the company continue to succeed and thrive.