21 Jul 5 Questions to Ask Before Handing Down Your Family Business

by Brian Kazanchy, CFP, RegentAtlantic Capital

You’ve spent decades of sweat equity building your family business from scratch into a thriving, profitable entity. Your eventual plan is to hand over the “keys” to your child or other younger family member. For many family businesses, this is an ideal arrangement: You and your spouse get to start transitioning toward retirement, and you also enjoy the satisfaction of watching the next generation of your family reap the benefits of the business you’ve built.

However, one hitch in this scenario is that many companies don’t have a family business succession plan. Good advance planning is a key part of any successful company transition. It’s perhaps even more important in family businesses, which may also have a layer of complicated, personal dynamics built in.

Before you start handing down your family business, here are five questions you should ask yourself—and discuss with your child(ren) or other successor:​

1. Is your successor passionate about your business? This can be a tough issue to broach, but it’s important. Is your child truly excited about working in the family business, or do her interests and talents lie elsewhere? It may be helpful to bring in an objective third party to facilitate this conversation so everyone can speak honestly. A financial advisor who knows your family and your business may be an ideal choice. Other options include a business-savvy family friend, colleague, accountant, attorney or even a psychologist.

As you can imagine, it’s important that your successor be committed to your company before you decide to put her in charge. If your child isn’t interested or just isn’t ready for ownership, you might opt to train a trusted employee or other family member, and have your child retain a financial interest in the business. She may decide to join the family firm later. You may want to leave that door open and spell out possible options in your succession plan.

2. Will you gift the business or will your child earn his/her way in? Your child can successfully inherit the business either way—one method is not necessarily better than the other. However, each approach requires advance planning. If you give the business to your child (either outright or as part of a trust), how will she acquire the necessary skills to run it? And how will your child garner the respect of your current employees without having “earned” her way in and up?

On the other hand, perhaps you own a restaurant and insist that your successor wait tables, then cook, then work as maître d’, then eventually take over. How will your child learn enough about your industry to think “outside the box” and be able to successfully evolve the company over time? Should he earn a business degree or work with a mentor? If possible, put these requirements or suggestions in writing as part of your succession plan.

3. What are your future expectations for the company? Do you want the family business to stay small and closely held, or are you comfortable with your child eventually expanding or even selling it? Clarify that for your successor. It can be very empowering for your child to know in advance, for instance, that you’re open to a shift in the company’s focus or even a sale. If your successor runs into an unexpected opportunity, he can then embrace it without worrying that he’s going against your wishes.

4. What’s the timing for your transition? Would you prefer to be completely out of the company within two years, or do you plan to stay on in an advisory capacity? Be as specific as you can. This kind of planning can help you, your employees and your successor decide how quickly they need to take over your duties, and whether they need help with management responsibilities.

5. Do you understand your successors questions/concerns? Handing over a family business isn’t just about you stepping out—it’s about your child stepping in. Take time in your planning to find out what your successor needs to know.

Is your daughter concerned about interacting with a long-time, managerial employee? Does your son have questions about financial aspects of the business? Does your successor need introductions to industry colleagues? Are there any generational differences in how you and your successor do business that you need to air out in advance?

In other words, ask “What can I do to make this transition easier for you?” The answers you get—and how you respond—can make the “handing off of the baton” to your next generation much easier and perhaps even more profitable than it would be otherwise.

Brian Kazanchy is a certified financial planner with RegentAtlantic Capital in Morristown. He may be reached at or (973) 425-8420 x235.

This story was first posted in July 2015.

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