^Blog Is Transitioning the Business To Your Children the Best Option?

For many business owners, passing the company to their children feels like the ideal ending. You preserve the family legacy, give your children an opportunity, and keep what you built in the family.

But there is one question that needs to be answered objectively: Are your children actually capable of running the business?

After 25 years of helping business owners plan for and navigate their exits, we’ve seen owners struggle with this question. They can clearly identify the gaps in their children’s experience, leadership ability or commitment, yet still believe family succession is their best exit option.

The problem is that an emotional decision can create significant financial consequences.

Separate Your Family Goals From Your Financial Needs

Before choosing family succession, determine what you need from your business financially.

If your retirement depends on receiving $5 million from the company, for example, transferring it to children who cannot successfully operate, finance or grow the business creates considerable risk.

Ask yourself a simple question: If another business owner presented me with this exact succession plan, would I recommend it?

Removing yourself from the situation can make the risks much easier to see.

You should also evaluate whether your children genuinely want the responsibility. Working in the family business and successfully leading it are very different things.

Your Legacy Doesn’t Require Your Children to Own the Business

Business owners sometimes assume they face only two choices: sell to an outside buyer or keep the company in the family.

There may be a better third option.

Selling to a capable buyer could protect the value you’ve created, provide the capital required for your retirement, and allow the business to continue growing. You could then use a portion of the proceeds to help your children pursue opportunities better suited to their abilities and interests.

Effective business exit planning isn’t simply about completing a transaction. It requires coordinating your financial needs, family objectives, tax planning, succession strategy and vision for life after the business.

Ideally, those conversations begin years before you intend to exit.

At Three60 Wealth, we help successful business owners evaluate these decisions objectively and build an exit strategy designed around three things that matter: protecting the wealth they’ve created, positioning the business for a successful transition, and helping their family move forward successfully.

Authored by: Jason Nagel, Head of Business Development at Three60 Wealth