Tips For Family Business Succession
Lincoln Watase, CEO and President of Yum Yum Donut Shops, evaluates the challenges with family succession of the business and provides advice on how to successfully develop the next generation of your business.
My answer is: very carefully. For most family and closely held businesses, successful succession planning is a big challenge. How do you create a multi-generational enterprise that embodies the founder's values and mission and it has the flexibility to adapt to ever-changing challenges and opportunities? There are two main challenges. The first is a state or inheritance tax planning. You don't want the passing of a shareholder to result in a big inheritance tax cash liability. This could force a sell-off of assets in order to raise the cash to pay the inheritance taxes. Find and experience the state tax attorney and start planning early.
The second is a little more delicate. How do you best develop the next generation to have the work ethic and values of the founder and the education skills and work experience to lead and manage the company? How do you balance the goals of getting the next generation interested in the company without creating a sense of entitlement? How do you deal with promoting one family member without causing resentment by the others? These are tricky questions. Only time will tell how successful we are.
Fortunately, my brother and sisters did a great job raising their kids. They are all smart, hardworking, and responsible. We meet once a year to update them on the company, and we deliver the same message: there are opportunities here, but they should do what they want to do. There is no obligation of pressure to work here. If they do want to work here, they need to work hard as an example to others, and they need to earn any promotions.