The sooner succession planning process is started better, and you will have more options. Another advantage: options, such as buying life insurance to fund stock ownership transfer, tend to be less expensive when owner is 45 versus 65. A child may have right to inherit business, but right to manage business must be earned. Urge your children to work at least two years outside family business so they can learn different skills and experience making mistakes. Establishing an outside Advisory Board to help manage transition allows trusted non family business professionals to help deal with tough issues. This advisory board is constructed differently than a board of directors and can be a very cost effective vehicle for bringing good advice and experience from outside. Conducting formal family meetings can help solve problems while they are small. Having experienced family business consultants like Family Business Experts lead first few family meetings can help establish and keep family focused on rules, goals and objectives. Develop non business interests. Develop financial resources that are independent of business. The best succession plan might be to sell rather than transfer. Sometimes, with family businesses, focus is so much on succession that most logical alternative is completely overlooked. If family strategic plan and business strategic plan have been done, we see two situations where selling is best alternative.

The business can't evolve with changing conditions or environment. This inability to evolve might occur because it can't find right people or because technology or environmental factors necessitate capital investment or expenditure beyond ability of family business to raise capital. The business has not been able to find and develop a competent successor. It is not easy for a family and business to objectively face reality in either of these situations and there is stigma of "defeat" or "quitting" that is often associated with a decision to abandon a goal. But harsh reality is that in either of these situations, failure is almost certain and will happen even if family decides to ignore reality and try to continue with business / transfer. So, failure becomes a matter of when not if. In either case, early and realistic recognition will let family sell business rather than lose its investment and at least have proceeds to carry on their goals in other forms.

Just like a physical obstacle course, succession planning for family businesses is like an obstacle course. You have to find obstacles, then overcome them... fly over them, dig under them, outflank them to move around them. And it is often ones that you didn't see that cause you biggest problems!

Every family and family business situation is different, so there is no one "master map" because there are no fixed or defined obstructions. However, certain things do tend to appear frequently, so we've compiled our checklist of frequent obstacles. If you look for and deal with these, you will have greatly improved your chances for successful succession.

A note about terminology: we have used "Dad" to identify a founder or retiring owner.

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Important Note About This Checklist! The goal is not to determine whether particular obstacles are true or not...

...If point is perceived to be true or present, then it IS an obstacle that has to be dealt with.

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Founder or Retiring Owner

First, and most importantly, Dad must believe his financial security is assured. Without this perception, there is a major obstacle and probability of Dad leaving business "voluntarily" is significantly reduced. What is Dad going to do with time and energy he had committed to business? Obviously Dad must be able to envision a positive, productive and meaningful existence away from business. Without having something to "move to" Dad likely will not "move from"... Will transition diminish Dad's self- esteem and negatively impact his self- concept? Very often in our society, "who we are" is generally described by "what we do". With regard to kids, most perplexing problem for Dad is how can he be both FAIR and EQUAL.