How to Prepare Your Child to Inherit the Family Business
Family business used to be a way of life and it was generally accepted that the younger generation would willingly take control of the family’s business affairs when the time came. However, the heads of family businesses are finding it increasingly difficult to get their children to take over from them.
A recent survey by Peking University found that 80% of potential Chinese heirs were reluctant to follow in their father’s footsteps, and it is not only in the East that this is becoming a significant problem. Two of the world’s largest hotel chains, Hilton and Marriott have also had to look beyond their founding family to secure the future of their business.
Why would your children not wish to inherit the family business?
1. They aren’t prepared
Second and third generation heirs of a family business may find the responsibility of running all facets of the firm intimidating if they have not acquired the skills, experience, and confidence to ensure the business is a success in their care.
2. They don’t want the responsibility
Often, children of business owners have grown up watching their parents persevere with the long hours needed to run an entrepreneurial venture and they have their own ideas of work-life balance. Also, the children of wealthy first generation family businesses have most probably not had to endure the hardships faced by their forefathers, that initially inspired the idea of maintaining the family unit.
3. They want to make it on their own
When family succession is not handled properly, children can become disengaged with the business and wish to step away to avoid stress and conflict.
How can you prepare your child to inherit the family legacy?
1. Create Family and Family Business Identities
Behind most successful family businesses lies a successful family. Approach your affairs professionally and keep these two identities separate so that family and family business issues do not affect each other and escalate unexpectedly. Create a strong family forum, both inside and outside the business, where each family member can confidently voice their opinion and feel included
2. Start the succession process early
Introduce your child to the idea of inheriting the family business from a young age and encourage them to gain valuable work experience within the family firm as interns at a young age or outside the family firm. Let them make mistakes and learn from them with your support and guidance.
3. Hand over the reins when you’re supposed to
It can be difficult for family members to relinquish control of their business when the time comes and to allow the next generation to take over. Create a solid succession plan and stick to it to avoid successors feeling disenfranchised and resentful.
If you would like to discuss your businesses succession plan and learn more about how to prepare you children to inherit the business you have worked so hard to establish, we welcome you to contact our experienced family governance experts:
Karim Ghandour: email@example.com
Marianne Saghbini: Marianne@legacyline.com
* Disclaimer: We have taken great care to ensure the accuracy of this communication. However, it is written in general terms and you should seek specific advice before taking any action. No responsibility can be taken for any loss arising from any action taken or refrained from on the basis of this communication.
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