Give It to the Kids!
Succession planning is one of the most important things a business owner is required to do. No one wants to see the business that they have worked so hard on building over the years (or decades) bite the dust. We are proud of our achievement. We started this from scratch. Or got it from Dad or Mom when it was just tiny. Or maybe it’s the source of family pride, from one generation to the next. Maybe it’s your only method of funding retirement. Or the difference between an apartment in downtown Halifax, or a villa in Tuscany.
Often our first thought is to pass it on to our kids. That works if they are interested, capable, and we can find a way to fund it.
But there are problems. The company may be the apple of our eye, but they see crab apples at best. Maybe they’re just not interested. Maybe they want to be a lawyer, or doctor, and your electrical business, or string of franchises, has no appeal.
And do they have the necessary skill to operate the business? You may be an outgoing salesman, but they got their mother’s side – they’re just pale-skinned CA’s (now CPA’s I guess).
Our children have more opportunities than we ever did (can’t you hear your parents saying that years ago?). They travel to Europe and Asia like we went to Yarmouth or Cape Breton. They go to universities, graduate schools, learn languages we didn’t care about, and have access to vocational schools that have come a million miles since we were young. They actually have tools and stuff to work with! They are smarter than we are, just like we were smarter than our parents. They can work in Alberta, make great money, and still live here and have a family. Go figure! They just might not want the life that we’ve been living.
Unlike our parents who had one job for most of their lives, we had a few jobs, and they are projected to have many.
Other problems arise if you have more than one child. One is interested, two are not. None of the five are interested. None is capable.
Ask yourself if you are doing the right thing by encouraging your kids to come into your business. Will they, and you, be happy?
Then you need to fund it. In theory, they can run it while you take money out, but sooner or later you have to pass it to them. What happens if you have more than one kid, and only one wants in? You have to give the others something. How about paying for your retirement? How do you fund that?
Do they have the right skills to operate the company? Can they provide the necessary leadership? Do they have the right personality?
First, they have to be interested. Second, they have to be capable. And third, the arrangement has to be funded so that you can retire.
Sounds pretty complicated? Just sell it, and give them cash!