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Whether or not you intend on retiring any time soon, it might be a part of your eventual plans to make sure that your child takes over the reins of the business. However, as simple as your intention might be, making that transfer can be a little trickier than you might realize. As such, here are a few ways that you should try to prepare for such a transition.
Put a succession plan in place
It takes some time to put together a solid succession plan for the business, so you shouldn’t leave it until the year that you plan to pass it on until you start to move. Make sure that you work with professional advisors, such as your accountant and legal team to help you cover the transfer of power and assets as well as possible. A tricky succession can get in the way of running the business, making it much harder for them to pick up the reins.
Be ready to pass on your properties, too
If you are in direct ownership of any of the business properties, then they are not going to transfer automatically when the business does. You can transfer them instead to your child’s ownership or you can have them transferred directly to the business so that they’re an asset of the business and not any one person. This usually requires a quit claim deed, which is effectively a way of having a name removed from the deed of a property. However, this doesn’t remove a person from a mortgage that is paying for a property, so make sure you transfer that separately.
Preparing your kid for leadership
Your child might, by this stage, be a perfectly competent and professional adult who does their work just fine. However, no matter where they are in their working life, you should take the time to make sure that they are ready for the next step. Find ways to improve their leadership skills by, for instance, delegating more responsibilities to them, giving them the lead on a project, and having them head or manage a team. This should give you an idea of what qualities they have as a leader and where you might be able to mentor them more closely.
Learning to let go
You might want to start sharing the seat of power with your child more and more as time goes on. It’s important to keep an open mind, as well. To put it simply, generational chances can also result in pretty major changes to how we lead and make decisions. So long as you have had the proof that your successor can manage and lead well and has the right priorities, you should be willing to accept that they have the good judgment to direct the business, even if they take it in a different direction than you would.
There are still plenty of business owners who do go on to successfully pass what they have built to their children. However, you shouldn’t assume it’ll just happen automatically, know what you need to set up in advance.
You may also know: The Pareto Principle: The 80-20 Rule Applied to Business Success