Mistake #2: Insisting That Your Kids are the Right Next Owner

Mistake #2:  Insisting That Your Kids are the Right Next Owner

THE TOP MISTAKES TO AVOID WHEN GETTING READY TO SELL YOUR BUSINESS

Mistake #2:  Insisting That Your Kids are the Right Next Owner

Often, business owners plan to pass their business to family, but they aren't always sure how to divide the assets or whether heirs want the business. To help flesh out what's important to both sides and ensure assumptions aren't getting in the way of sound business decisions, exit planners consult with the adult “children” to assess their capacity and readiness to  buy out the parents and run the company. If joint ownership between siblings is an option, a trusted advisor will also help determine their ability and willingness to work together.

In a survey of more than 10,000 manufacturing firms across the United States and Europe, Bloom and Van Reenen of MIT found that management practices were crucial to explaining company success or failure. Published in 2008, the research found that a significant determinant of good or bad management is whether the kids of the founders had taken the driver's seat. 

"We find that firms that hand down management within the family have worse management practices, particularly those that hand it down to the oldest son," Bloom says. "They were managed extremely poorly and often ended up bankrupted by poor management practices."

Of course it’s hard for a dad or mom to break the news to junior that he’s not getting that promotion to the top, but that’s another advantage of hiring professional exit planners: we navigate the tricky personal relationships and make sure your company is protected, for generations to come.

#business #exit planning #strategy