Don’t Transition Your Business to Your Kids

By John Warrillow

I bite my tongue every time someone suggests transitioning a business to a family member.  Family businesses are fraught with problems.  Here are the top seven reasons not to transition your business to your kids:

1.  What if your son or daughter is smarter than you?  The one thing your business can’t give your kids, and the one thing you can’t buy them as a parent, is the self-esteem that comes from knowing they are succeeding on their own.

2.  What if your son or daughter is less intelligent than you?  If your child lacks your smarts, intuition, acumen, etc., he or she will forever toil in your long shadow.  Would you want your kids to feel inferior for the rest of their lives?

3.  What if your kids are lazier than you?  Most second and third-generation family members feel entitled to the fruits of the family business.  Do you want to raise spoiled kids and grandkids?

4.  Your kids may not want to run your business.  No matter how successful and profitable your business, your kids may not want it.  Would you want your kids to resent you for guilting them into the business down the road?

5.  What if you pass on a jalopy?  If nobody else would buy your business, why would you want to lock your kids into the same handcuffs you’ve worn?

6.  What if you alienate your employees?  As soon as you invite your newly minted MBA son or daughter to work in the business, your professional managers will dust off their résumés, realizing that Junior has won the lucky-sperm lottery and is about to leapfrog them on the company ladder.

7.  What if you upset your other kids?  Would you want to irrevocably change your relationship with the children who are not invited to replace you?

A better option is to sell your business to someone else.  Buy lunch for an M&A professional or a business broker and ask for his or her advice.  If you’re desperate to give your kids a helping hand in life, sell your business and give them some of the proceeds.

John Warrillow is the author of Built to Sell: Turn Your Business into One You Can Sell.                                        [download issue]