Bill Keen is the Founder and CEO of Keen Wealth Advisors and the Best-Selling Author of Keen on Retirement.
If you have a family business, you may wonder what will happen to your legacy after you’re gone. And how long will the business you’ve poured blood, sweat and tears into survive after you step away from the helm?
These answers, of course, aren’t straightforward. There are so many factors that come into play when it comes to a business’s longevity. However, there are several things you can do to help stack the odds of long-term success in your company’s favor. Let’s explore three of them here.
1. Don’t Shield Your Kids From Challenges
Many of us start businesses to take care of our families, build generational wealth and create security for our loved ones. These are laudable goals; however, you aren’t doing your kids (or your business) any favors if you try to shield them from every obstacle and challenge that comes along.
Leadership expert and combat veteran Noel DeJesus has said, “Stress builds character and failure breeds motivation.” I’ve seen the truth of this over and over in my own life, not to mention the lives of my clients. When people rise to the challenges life presents, it creates a resilient character. However, if later generations are shielded from obstacles—and instead are allowed to coast along—they never develop the same grit. As a result, they struggle to cope with difficulties.
My point here is, while there’s nothing wrong with being comfortable, it’s invaluable to their growth and development to let your kids learn how to navigate their struggles on their own. Be there as a backstop and to provide moral support, but let them fail and learn from their mistakes. When you do, you teach them how to thrive even when you aren’t there to protect them, and you help ensure they’ll be able to keep your business going if and when they take over.
2. Engage In Succession Planning Now
Of course, as much as we may want our children to take over the family business, we also need to be prepared for the fact that they may not share that dream. One of my daughters, for example, is a family practice physician (currently in her third year of residency). Another one of my daughters got her degree in event management and hospitality from one of the top schools in the country for that area of focus. And my son got his mechanical engineering degree and is a flight test engineer and pilot for Garmin.
None of them are planning to take over my business when I’m ready to retire. However, each of them is thriving in their personal and professional lives, and my wife and I couldn’t be prouder of them. We have two other daughters (still in school); perhaps they’ll follow in my footsteps, or perhaps they won’t. Either way, we will stand behind them as they work to achieve the goals they have for their own lives.
Whether your children want to join you in the business or not, start engaging in succession planning now. Depending on how you set your succession plan up, the business can still remain in your family even if your children don’t take over. By taking the time to begin preparing someone to succeed you—whether that person is a family member or not—you can help ensure that the business will not only outlast you, but will thrive well into the future.
3. Make Your Legacy About More Than Money
According to current federal tax law, you can give up to $17,000 to anyone you want each year without triggering a gift tax. My wife and I take advantage of that because—even though they are all self-sufficient—we love giving our children some financial support.
As much joy as it brings us to give them some money from time to time, my wife and I are cognizant that the legacy we want to leave to our kids is more intangible. We’ve modeled giving to the less fortunate, being responsible, taking accountability for our actions and developing resilience of character. Far more than money, these things are our true legacy.
As a business owner, prioritize passing on experiences, lessons and values to your children. We’ve all heard horror stories of lottery winners going broke shortly after winning. When someone hasn’t developed the discipline to manage a windfall, they won’t be able to handle their newfound money. Make your legacy solely financial, and odds are your children will exhibit reckless behavior (with your money and your business).
Make Sure They Can Handle The Little Things
I believe that, with the right approach, there’s a good chance your family-owned business can survive for generations. However, you must refrain from spoiling your kids and bailing them out every time they get into trouble. Instead, teach them the value of money, and teach them to respect the family business that generates it.
Keep in mind, too, that legacy is about more than money. So, have regular family meetings where you articulate your values and guiding principles. Encourage your children to think about and share their values and aspirations, too.
Finally, talk to your financial advisor and your attorney to set up your estate plan and engage in succession planning in a way that makes sense for your particular situation. Remember, we’re talking about your legacy (in every sense of the term) here. Taking the time to protect it is time well spent.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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