
Courtesy Morgan Stanley
By David L. Cumming
As the Baby Boom generation continues its march to retirement, a significant number of entrepreneurs will soon begin the process of transitioning family businesses to the next generation.
If you are about to embark on this journey, here are some of the potential pitfalls to avoid.
According to the 2016 U.S. Family Business Survey conducted by Price Waterhouse Coopers, only about 43 percent of private businesses have done any exit planning whatsoever. Failure to execute a business transition may lead to multiple negative outcomes, including:
1. Breakdown of communication and trust within the family unit;
2. Inadequately prepared heirs and absence of a clear vision or mission to align family members;
3. Failure by advisors to properly address taxation, governance and wealth preservation issues.
With success riding largely on a family’s ability to communicate and to clearly articulate a plan for the future, the following guidelines may help to ease the business transition process.
Get the process started years before the actual transition occurs. Some experts recommend building an exit/transition strategy into the initial business plan. As part of the planning process, business owners should create: