A family transfer (also referred to as a family succession) is where business ownership is transferred to one or more children or relatives.
This transition alternative is fraught with immense risks.
Many owners inadvertently set up their children for failure.
Only consider this alternative if one or more of these factors exist:
- You have children, or relatives, who demonstrate a desire and proven aptitude for running the business.
- There may be an established tradition wherein the company has been successfully passed through a number of generations.
- The business itself is growing and your family will not get a better investment elsewhere.
Some reasons why you might not consider this alternative:
- Risks associated with these transitions are extremely high, especially if planned & executed poorly.
- The business valuation may well result in a lesser valuation than a competitive sales process.
- Payment of the sale price may be deferred.
- Will you be able to run the business with the same energy and dynamism while waiting for the heir apparent to take over?
Often owners underestimate the different competencies required to run their business, from technical skills to softer interpersonal skills, like managing staff and driving sales teams. Your chosen heir may struggle to match you.
This is an alternative where it is crucial you consult with trusted third parties to provide an impartial view – skill and will – on the family successor.
Important Caveat – Choosing whether this transition alternative, or a mix of the other 7 alternatives on our website, is right for you really depends on your (and your shareholders) individual circumstances. This important decision requires careful analysis, before deciding which alternative strategy suits your circumstance the best. Smart transition decisions.