Succession Planning for Your Family Business

Succession planning - Chris McGrath, Attorney At Law - McGrath, LLCTypically, entrepreneurs tend to have a higher risk tolerance than those who do not know the joys and struggles of running a business. We live in a culture that celebrates being successful in business, as illustrated by reality shows like The Apprentice and Shark Tank, and then takes it further when the business is family owned and operated (see, Pawn Stars and Duck Dynasty). The bigger the risk, the bigger the reward – in general.

But when it comes to thinking of retirement or succession plans overall, the biggest risk—avoiding to plan for the future—doesn’t pay off in the end.

Succession planning means considering the end of the road, like retirement, selling the business, and yes, facing the grim reaper. It also means considering disability or having a sudden family emergency. Ever hear of the “Sandwich Generation”? According to a recent study by the Pew Research Center, 47% of Americans between the ages of 40 and 59 are sandwiched between caring for a parent over the age of 65 and caring for minor children or supporting a grown child.  The study highlights the need to have a financial and business plan in place that takes into account an unexpected or extraordinary event.

It also raises a question for business-owners: what would happen to the family if the family business owner became seriously ill or was otherwise incapable of working?

Succession planning is a necessary part of success. For some, their kids are not only the best part of the plan, they are in fact the only part. Not everyone, however, has the drive to run a successful business. For some people, the dream of owning their own business continues to motivate all of the effort and perseverance needed to make that dream come true. For others, the idea of running a business creates ambivalence about tolerating risk. As we know from not only our own experience but also popular culture, tolerating risk is part of making a business work.

Are there any ways to help you and your children measure their chances of success?  This article appeared in the New York Times’s excellent blog, “You’re the Boss: The Art of Running a Small Business.” It offers a helpful discussion on the pros and cons of entrepreneurship. I would also like to add this point: talk to your financial advisor and your business attorney about your succession plans. There is no one-size-fits-all solution. Start those conversations now, before it is too late.

Then, reward your planning prowess by enjoying that episode of Duck Dynasty, knowing that you have taken care of your family and your business without needing a reality-TV show contract to do it.