A Publication of WTVP

As the Baby Boom generation continues its march to retirement, a significant number of entrepreneurs will soon begin the process of transitioning family businesses to the next generation. If you are about to embark on this journey, there are a number of potential pitfalls you will need to avoid.

According to the 2016 U.S. Family Business Survey conducted by Pricewaterhouse- Coopers, only about 43 percent of private businesses have done any exit planning whatsoever. Failure to execute a business transition may lead to multiple negative outcomes, including:

1. Breakdown of communication and trust within the family unit;
2. Inadequately prepared heirs and absence of a clear vision or mission to align family members; and
3. Failure by advisors to properly address taxation, governance and wealth preservation issues.

With success riding largely on a family’s ability to communicate and to clearly articulate a plan for the future, the following guidelines may help to ease the business transition process.

Start Planning Early
Get the process started years before the actual transition occurs. Some experts recommend building an exit/transition strategy into the initial business plan. As part of the planning process, business owners should create:

Prepare the Next Generation
Identify the skills and leadership qualities the business may need in the future, and then prepare young family members to fulfill those roles. This will likely require sharing knowledge and providing educational opportunities.

Manage Conflicting Priorities
It is not uncommon for younger and older generations to have differing, and conflicting, priorities for the business.

It is important that families express their concerns openly, and it may help to engage a professional facilitator. When all parties feel they are being heard and respected, the sense of commitment to the business—and the transition process—is strengthened. iBi

Cathy S. Butler, CFP, CRPC is a financial advisor with Morgan Stanley. For more information, visit