If only my last name was
-- I'd be in line for brew master of America's oldest brewery, now in its sixth generation of family ownership.
But I'd just as soon go for the name Teutul and be building custom
Orange County Choppers
with my dad and two brothers on the Discovery Channel.
According to a 2006 online member poll conducted by the
National Association for the Self-Employed
, nearly a quarter of microbusiness owners plan to pass their business to another family member.
Still, keeping a business in the family isn't all cheers and fast bikes; it can be more like one of those destructive dinner-table discussions we all try to avoid. According to findings by Joseph Astrachan, editor at
Family Business Review, more than 30% of all family-owned businesses survive into the second generation while only 12% survive into the third.
A Family Affair
Bobby Knell, president of
American Leak Detection
, would have sold his Dallas franchise -- which he estimates will be worth about $2 million in the next two years -- if his son had not expressed a desire to work for him and eventually take over.
But problems arise when Knell considers his impending retirement. At that point, his son won't be able to pay him the value of the business, but Knell can't afford retirement if he hands it over for free. Knell is therefore thinking about hiring an exit-strategy consultant to help sort out the tax implications of a gradual payoff, in which Knell would stay on the company payroll as a consultant.
The next generation can bring fresh ideas to a business, especially if they have been through management courses, says Louis Stanasolovich, CEO of
Legend Financial Advisors
. Even with the right training, though, the takeover is never smooth sailing.
With that in mind, these seven guidelines from seasoned advisors can help small-business owners avoid disaster.