Advice for when it’s time to transition the family business

Few decisions are as individual and personal for the owner of a family business than the decision to move on. Sometimes moving on simply means moving on to another business, hence the expression “serial entrepreneur.” Sometimes it means transitioning to a time when you can finally relax and do the many tasks — which might include volunteering or travel — that you have been putting off with the pressures of day to day administration.

Health might factor into your decision or passion.

One thing you can try to avoid is closing your doors leaving nothing behind. As with all planning, you often can choose in advance. Business succession difficulties run the gamut from personality differences, difficulty in convincing clients to stay with the new owner long enough to make the sale attractive, and solvency if there is a long term buy-sell agreement. Even where everything else works, and even when family is involved, the emotional effect of loosening control over a business that might have taken a lifetime or even generations to build can be traumatic.

Here are some issues to take into account.

• The business needs to work without you. Giving up control of a business involves stepping back to see whether it could run on its own. This is a tough transition for someone who has invested years of hard work and begins to believe he or she is indispensable. It is important not to be indispensable or by definition, the business might not survive without you.

• Gradual transitioning can help. Sometimes business owners take on managers who, over time, come to know how the business should run. This makes the transition easier. In families, stock transfers over time can gradually increase the participation of the new person in charge. Note that this also has estate planning consequences. If more than one adult child is involved, roles can be developed depending on the special skills of the parties. If one child is going to assume a dominant role, then consideration should be given to how this affects inheritance overall and the perceived fairness in the family so that no one sabotages the arrangement.

• Consider Buy-Sell Agreements. Where others are involved in the business, there should be discussion in advance regarding buy-sell agreements. Funding can be by life insurance or other means. If you have children, family, or current partners who can effectively run the business, involve them early.

• Decide whether your business is marketable without you. Sometimes your business is pri