It was 1995 when a loaf of bread cost $1.15, a US postage stamp cost 32 cents, and it only cost $4.35 to go to the movies. A popular movie that year was Billy Madison which starred the still famous, Adam Sandler who played an immature adult who had to repeat grade school in order to inherit his father’s hotel business.
The movie was a cult classic and a hit at the box office, but the father-son dynamic is a situation that some entrepreneurs may find themselves in. An entrepreneur will get to a point where they’ve built a successful company and they’re ready to pass their business along to an underprepared heir.
But what happens when your child is a ‘Billy Madison’ who isn’t capable of running the company? Here are some tips on how to successfully pass the torch into safe hands:
Introduce your child to the business at an early age. When you come home from a long day of work and sit down at the dinner table, try not to vent about the negative events that occurred throughout the day. You want to make your business and work sound appealing to them starting at a tender age.
Also, don’t let them to assume that just because they have the same last name as the owner they’ll be getting a free ride. Give them the opportunity to pick up a summer job at the company and begin to learn more about how it operates. They should have to work hard like anyone else and prove that they’re capable of taking over the business -- when the time is right.
Choosing which child will be your successor. If you have more than one next of kin, it’s more than a game of rock, paper, scissors. The decision is much more complicated. Truth be told, there’s no easy way to make this decision, but it has to be done. Giving your children equal ownership may work for a brief period of time but it won’t permanently solve anything. You have to ask yourself which one of your children has the best leadership skills, will be respected by the rest of the staff, and who has the best vision for the future of the company.
Additionally, avoiding perceived nepotism around the office is imperative. Let key staff members digest an appropriate leadership transition plan, and have them give presentations about the impact of inevitable operational changes to the rest of the team.
Know when it’s time loosen the reins. You’ve spent years building this company from the ground up. There’s going to be a time when you need to be able to completely remove yourself from the decision-making process. For any founder/CEO, it’s difficult to stomach this loss of control. Set up a contingency plan that takes place over a few years. This will give you the opportunity to train your predecessor and leave the company in a position where it will continue to succeed. Oh, and retaining a board seat isn’t a bad idea.
These are just a few tips that can assist you when the time comes to hand-off the family business. Members of Entrepreneurs’ Organization have dealt with every challenge businesses face. Stay tuned for programming in 2016 specific to managing and preserving a family business.