Advivo Partner, Dale Edwards, explains how to navigate when your children aren’t interested in being part of your business’s succession plan.
For many entrepreneurs, the dream isn’t just about building a successful business; it’s about creating a lasting legacy that can be passed down through generations. However, what happens when the next generation doesn’t share the same passion or vision for the family business? This dilemma is a reality for many business owners, and navigating it requires careful consideration of various options.
One common scenario is when children or heirs show little interest in continuing the family business. This situation can be challenging for business owners who have poured their heart and soul into building their enterprise. The desire to preserve the legacy and ensure the business’s continued success can sometimes clash with the reality of heirs pursuing different paths.
When faced with this situation, business owners often find themselves contemplating three primary options: retaining ownership with unrelated management, selling the business, or exploring the viability of a management buyout.
Hiring External Management
Retaining ownership with unrelated management can be an attractive option for business owners who are reluctant to let go of their creation entirely. By bringing in external management, the owner can ensure that the business continues to operate smoothly and profitably, even if family members are not actively involved. This approach allows the founder to maintain a sense of control and preserve the legacy they’ve worked so hard to build.
However, this option comes with its own set of challenges. Entrusting the business to unrelated management means relinquishing some degree of control, which can be difficult for founders accustomed to calling the shots. Moreover, finding capable and trustworthy managers who are aligned with the founder’s values and vision can be a daunting task.
Choosing to Sell Your Business
Selling the business is another option that many founders consider when their heirs are not interested in taking over. While selling the business can provide a lucrative exit strategy for the founder, it also means letting go of the legacy they’ve built. For some founders, this can be a painful decision, as they may have envisioned their family carrying on the business for generations to come.
Additionally, selling the business outright may not always be the most financially advantageous option, especially if the market conditions are unfavourable or if the business is heavily dependent on the founder’s personal involvement.
Exploring a Management Buyout
A third option is exploring the viability of a management buyout, wherein the existing management team or employees purchase the business from the founder. This approach can offer a smooth transition of ownership while allowing the founder to retain some degree of involvement or influence, depending on the terms of the buyout agreement.
A management buyout can also help preserve the founder’s legacy by ensuring that the business remains in the hands of individuals who are intimately familiar with its operations and values. However, executing a successful management buyout requires careful planning, negotiation, and financing, and may not always be feasible depending on the financial resources and capabilities of the management team.
Ultimately, the decision of what to do when heirs don’t want to continue the family business is deeply personal and depends on a variety of factors, including the founder’s financial situation, their attachment to the business, and their long-term goals. While preserving the legacy is often a priority for founders, it’s essential to weigh the available options carefully and choose the path that aligns best with their values and objectives. Whether it’s retaining ownership with unrelated management, selling the business, or facilitating a management buyout, the goal should be to ensure the continued success and longevity of the business while honouring the founder’s legacy.
