It is the dream of many business owners to eventually pass down their business to their children or grandchildren. After all, you spent your life enjoying and building your company. Of course, you would want to share that with your family and see it live on after you retire. But it’s not necessarily the right decision for every business – or every family.
I was reminded of this recently as I drove through my hometown and saw that a local favorite restaurant had gone out of business. This restaurant had been successfully family owned and operated for over 30 years. However, only a few years after the parents had handed off operations to their children, their doors were shut for good.
While there were both internal and external factors that contributed to this family-run business shutting down, it’s still a cautionary tale for many individuals who wish to start a family business. Few businesses last for multiple generations. In fact, less than 30% survive into the second generation. Before you hand over the reins, you need to ask these questions to find out if passing down your small business is the right decision.
Are they interested?
The best businesses are the ones run by individuals with the passion for them. You had the passion to start your business and the person you pass it down to needs to have the passion to keep it running. If you feel you’re forcing your children or grandchildren into a career that they don’t really have an interest in, then passing down the business may not be the right decision, because if they don’t have the interest, your business will lose the spark that makes it special and customers, suppliers, and employees alike will begin to notice the difference.
Do they have the skills?
Skill is another important factor to consider when choosing whether or not to pass down your business. Even if someone has the interest in carrying your business on into the next generation, they may not have the right skill set to run a fully operational business. This question requires a more long-term assessment. The person you plan to hand your business down to needs to be somewhat involved in the day-to-day operations. This way you can determine what skills they have, what skills can be gained, and ultimately if their personality and talents are suited for running a business. Sometimes you may be able to pass down the business to more than one individual, whose skills complement each other and whose personalities match well. However, be careful of how many people you choose. Too many cooks in the kitchen will only create chaos!
Is Your Business Sustainable?
The last factor to consider is how sustainable your business is. The ideal is for it to be a well-oiled machine built for continued success. After all, you want to pass down an asset that will support your successor’s lifestyle and family, not burden them. Ask yourself, is your business based off a fad or trend? Are the current operations set up to easily adapt to change? Is it scalable to grow? Is there still a viable market you can reasonably compete in? These are all essential questions that can help you determine how sustainable your business is.
Passing down your small business may be your dream, but don’t forget that there are other people involved in this decision who you need to consider. So, whether it’s with your retirement or many generations to come, just make sure your business goes out on a high note.