This article are provided for information purposes only, and are not intended as legal advice.

Succession – how do you know your kids will do well in your business?

May 19th, 2010

You have owned and operated your business for many years, in fact, you may have created this business from scratch. You have kids and it is your desire to have your kids continue to run the business after you retire.  Is this a good idea?


Many entrepreneurs want to leave a legacy and they want their family to continue on what they have built long after they have passed away.  Some believe that the business is very successful but what you get when you sell the business is not that much compared to the annuity that it generates and they would rather the kids have the annuity of profits rather than getting more cash now when the father/mother does not need any more.


Just because you have a child, that does not mean that they will succeed to run the family business.  Remember, the first generation builds the business, sometimes, but not always, the second generate may take this business to the next level and grow it significantly.  The third generation, on average makes many bad investment decisions, may over leverage the business and the business ultimately fails.  If the third generation does not destroy the business, it rarely goes beyond the fourth generation.


How do you know if you child will do well?  The best thing to do is ask if they want to be in the business, many are often feel obligated to carry on in the business and have no desire to be there.  If they are interested, spend money on psychological testing, see if they have the aptitude to running the business.  If they are, give them proper training. Don’t throw them to the wolves and hope that they learn, provide them a mentor, ensure that they get well rounded and learn the ins and outs of the business. If you give them a position, how will they learn?  Will they receive the respect of the employees or will they make fun of them and don’t respect them because they are their because of who they are, not because of their abilities.  Without the respect, the person does not learn and will not succeed in the parents foot steps.


If the children are to succeed, make sure they receive the proper education in school and receive the proper training in the business. maybe even working for someone else for a short period of time may allow them to see how other people run their business and they can bring back some fresh ideas to run the family business.

Filed under: Succession — Gary Landa @ 9:04 am

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