Choosing a CEO hinges on interest and aptitude by Jimmie Wilkins
Planning on retiring from your business? Aren't sure how to pass on the family business? First, congratulations for joining the ranks of a crucial segment of our economy, the family business.
It is estimated that 90 percent of all U.S. businesses are family-owned or -controlled, ranging in size from the traditional small business to one-third of the Fortune 500 companies. These family businesses generate about half of the gross national product and account for more than half of the total wages paid.
Unfortunately, less than one-third of family businesses survive transition from the first to the second generation, and less than one-third of those survive from second to third generation.
So planning is critical.
Assuming you already have a business plan, let's look to the idea of a succession plan.
Succession planning is a process. This plan will provide the framework for your decisions about choosing an heir, professional development and training, other family member involvement and the path to your departure.
Flesh out each of these areas, and you start to see the road map you need for successful transition.
Who? Who will run the business? Choosing your successor is probably the most stressful decision of the entire succession process.
It can be the most difficult but is, as you know, the most crucial. The method you use to identify the family member -- or outsider -- who will fill your shoes also reflects the style in which you run your business.
How? How will the successor be trained? There obviously is a need to know the intricate workings of the business.
In addition to the technical aspects of the business, however, the successor also will need finely tuned decision-making skills, leadership and interpersonal skills.
What? What other family members will be involved? You need to know whether they even want to be active in the business.
A careful analysis of each person's individual skills and aptitudes will be very important to providing meaningful and gainful careers for them. Obviously, you have an idea of what they can do. Do you know what they want to do? Is there an opportunity within the family business for their professional and personal growth?
When? When will control be transferred? The actual transfer happens when you, the owner, retires. The smoothest transition will be timely and final. Although the transition may be gradual once you set your retirement date, honor it.
How? How will the assets of the business be distributed? As an owner, you are used to certain salary and benefits. What will fill the gap?
If your financial security is contingent on the business' daily operations, you will be reluctant to retire completely. Will there be a buy out? Can the business successfully operate with an additional debt load? Will terms be acceptable?
This is obviously not comprehensive, and you will need the expertise of your attorney, accountant and financial planner.
This is, however, a place to start.
Jimmie Wilkins is director of the Chemeketa Small-Business Development Center.
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The Oregon Small Business Development Center Network’s funding partners
include sixteen community colleges, three regional universities,
the U.S. Small Business Administration and the Oregon Economic & Community Development Department.
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