Seven Tips to Keep It in the Family

1. Don't push it.

Gene Fairbrother, the lead small-business consultant for NASE, has consulted with tens of thousands of businesses. He often sees parents pushing their businesses onto the next generation despite resistance or lack of interest.

When the next generation doesn't care about the inherited business, however, they may put it up for sale, run it into the ground or create a negative atmosphere, which is bad for the whole operation, he points out.

2. Make them leave the nest.

No matter what the business, says Fairbrother, real-world experience is essential. He suggests college graduates go to work at another company or in another city for at least a year before starting at the family business. "[The younger generation] needs to see what other people are doing and then come back with eyes wide open," he says.

3. Withhold handouts.

Fairbrother recommends developing a structured transition plan to bring the next generation up through the ranks instead of handing them control. "[The son/daughter] has to prove 120% that they can do the job, not just because they're the boss' kid." Slow integration will also help to keep your entire staff happy and more willing to respect the new generation of owners.

"I'm not an advocate of handing things to people," says Stanasolovich, who recommends progeny buy the business over time while simultaneously proving their ability to keep the company competitive.

4. Combat sibling rivalry.

Problems may arise, says Stanasolovich, when one child decides to work in the business but those opting out still want a piece of the assets. Parents can resolve this by giving the noninvolved children more passive forms of ownership, such as a limited partnership or nonvoting stock.