By Gary Pittsford, CFP®
President and CEO, Castle Wealth Advisors, LLC
Many business owners today are between the ages of 55 to 75. A few of you inherited the business from your parents, but most of you started your company from zero and have spent the last 30 years or more growing the company, through good years and bad, to where it is today.
About 25% - 30% of you have children working in the company who would like to eventually take over. Having the next generation take over the family business is always desirable, but managing a larger company today takes skills that you didn’t need when you first started your company many years ago. Preparing the next generation to run the company that you have today takes a lot of preparation and planning on your part.
The 100 oldest family businesses still operating in the United States were created between 1638 and 1855. Twentyone of those old businesses were started before 1776. Those families have learned how to educate new generations many times over.
To get the next generation ready to take over, you need to change your daily focus from being President and key decision maker to becoming the coach who will train the next generation of managers, officers, and stockholders. You need to start thinking like a coach and develop a playbook which will contain a timeline for the next generation to take over the leadership and a transition plan to move all the voting stock to one or more children.
Many business owners tell me that they plan to die with their boots on, or work in the business until they drop. These ideas are possible. However, when that day comes, I am sure you will want the right people in the right jobs, with the right training to keep the company growing for another 30 years.
Look at your children just like you have looked at all of your employees for the last 30 years. Which of the children are good with customers, vendors, and your community? Which of your children are better with computer software programs, ordering inventory, and handling advertising? Put the right children in the right position where they fit and make sure they have all the best training you can find for them. Training may come from a college education, a technical school, cooperatives or associations that you belong to, or through special conventions that focus on these topics.
One of the hardest discussions that a parent has is talking about family financial topics and the family business. Most business owners today were not taught at a young age by their parents to talk about their personal finances or money in general. Regardless, the day will come when your children will learn all about your business. Wouldn’t it be better if you were here to frame and monitor those discussions and their learning process?
Develop a 3 to 8 year transition plan. As the new company coach, pick the most important accomplishments that you want to happen during each of those years. Write down those annual goals. Now your transition plan is starting to take shape!
Next, sit down with your financial advisor, attorney, and accountant for two hours and tell them what your thoughts are and what you have written down so far. They can help you develop your important hand written notes pertaining to your transition plan into a detailed blueprint encompassing the transition of voting stock, retirement income security, and long term family wealth management.
Your decision to become a coach by leading your children and key employees through a well thought out succession or transition plan will not only benefit you, but will protect your company, your employees, and your family for generations to come.
Gary Pittsford, CFP®, is President and CEO of Castle Wealth Advisors, LLC. Castle specializes in helping families and closely held business owners with valuations, succession planning, estate and income tax analysis and retirement income security. Castle’s senior partners work with clients throughout the country in making logical decisions that help them fulfill their personal and business financial goals. For more information visit www.Castle3.com, call 1-888-849-9559 or e-mail Gary directly at .