There are many factors that will impact the success or lack of success of an internal successor. Whether your objective is to transfer or sell your business to your child or children, or to a key employee or key employee group, there are many questions you need to seriously consider. A few of those questions are as follows:
Family Succession Considerations:
- Do one or more of your children want to be business owners?
- Do one or more of your children have the necessary skill sets required to be business owners?
- If one child becomes the owner, does s/he have siblings that would be resentful?
- How will your children work together without your presence in the business?
- How will Key Employees react to your child or children as business owner(s)?
- Can your children engage the Key Employees and obtain their support to help the business thrive?
- After transferring the business, will you have the cash you need to support your post-business lifestyle?
- Would your child's or children's lack of success detrimentally impact your post-business financial stability.
- Would it be beneficial to have an outside help to facilitate transitioning the business from you to your child or children?
Key Employee Succession Considerations
- Does one or more of the key employees (KE’s) want to be business owners?
- Do the KE’s have the required skills and ability to be successful business owners?
- How will the KE’s work together without your presence in the business?
- If one KE takes ownership, will other KE’s become resentful?
- Do KE’s have access to financing?
You will note that some of the pertinent family succession considerations are also applicable to key employee successions. Experience has shown that an insider's lack of financing is generally the easiest issue to resolve through the exit planning process. The more critical issues are the internal successor's inability and/or lack off desire to be a successful business owner.