Seven Tips to Keep It in the Family

5. Bring in an outsider.

Most of the time family transitions are done incorrectly, says Fairbrother, because of the sense that "family is family," and members let emotions and squabbles abound. To avoid a family feud and a botched takeover, hire a third, disinterested party like a business consultant or accountant as an intermediary.

6. Learn to let go.

Most importantly, as the child begins to take over more responsibility, the parent must back off. Parents cannot micromanage, says Fairbrother, or they risk child-parent animosity that can filter down to employees. "Instead of getting reasonable decisions, you get no decisions," Fairbrother says.

Sometimes stepping back for the parent means taking a part-time position in the company and gradually allowing offspring more responsibility. "You can't give anybody respect without giving them authority," Fairbrother explains, adding that parents also need to expect and accept mistakes as part of the learning process.

7. It's never too early.

Finally, keep in mind that 19% of family business participants have not completed any estate planning and only 37% have written a strategic plan, according to statistics from the Raymond Institute/Mass Mutual 2003 American Family Business Survey.

Family-business owners make the mistake of thinking they have plenty of time, when in fact they should begin writing up a transition plan as much as 10 years before they hand the business over to the kids, says Stanasolovich. A smooth generational transition takes time, money, and a good attorney. While prices for a good plan can reach five figures, it's like insurance for your business -- you can't afford not to do it.