Having a business passed down to you can be an exciting yet scary endeavor, and the situation varies widely depending on how well prepared you are for the transition. Hopefully, you have spent enough time with the business to understand the plans, key players, and how to best serve your clientele. Reviewing and updating documentation, creating rapport with clients, and developing relationships with accountants, employees, and managers can be crucial when undergoing a smooth transition. Exposure to all aspects early on can make the process go much easier for all parties involved.
If you happen to be in a situation where inheriting the family business was unexpected or you did not have enough time to fully make provisions for the future, the best way to get started is by talking with some of the main team members involved. You should consider talking to the following types of professionals during the set-up and transition: business advisors, attorneys, accountants, financial planners, managers, and everyone involved in decision making for your business. It can also be beneficial to hire advisors with your best interest in mind that can provide a third party perspective on where to start.
Getting everyone on the same page can be a challenge, but meetings and open discussions are vital in gaining a mutual understanding of the company’s short and long-term goals. Now would also be a good time to discuss your new role in the business and the plans you have for the future.
The best way to get started when taking over the business is to do your research. Look into documentation that can explain the current financial state of the company and the direction it was heading at the time of the crossover. Some of these documents include: tax returns, bank statements, budgets, licenses, letters of incorporation or trademarks, and loans, credit, mortgages, and other forms of debt. After taking some time to review the information, start preparing your own ideas and questions about how this transition affects the legal and financial status of the business. This would also be a good time to address any outside implications of the inheritance, such as disputes about succession, pressure from shareholders, and any other third parties involved.
After you understand the current state of your business, the next step is making sure you have team that is well organized and assured. Keep communication lines open between employees, stakeholders, and all others involved with your business. Let them know that you are doing the best you can to stay available and are willing to accept constructive input into the next steps for the business. Ask for advice from the managers and advisors on how to make the transition easy as possible, and what has been working and not working in the past as far as methods and execution. Try not to make any big changes yet – it is important to stay mindful of the team’s wishes, as they will be supporting you through a time that may be uncertain for the company.
The last and most important area of focus is establishing a concrete business plan. Hopefully before this time comes you have a strong guideline for how the business is run. Now you can work on making this plan geared towards the plans you have for the future. According to the Family Business Institute, about 30 percent of family businesses survive in the second generation. Meeting with advisors and your banker on a regular basis while getting started can lead you in the right direction regarding customer needs and market conditions. Putting in time and effort into the business will multiply your rewards worth reaping for years to come.
At Gulati Law, we have helped many small businesses transition from old ownership to new, and protect the new assets in the process. We have a private referral network in which we can refer depending on your needs. Contact us today if you have a question or need further information!