Q&A: Passing on a small business to children

Wayne Bergman is a coach with the business coaching firm ActionCOACH. It has 1,000 offices in 32 countries. He has 25 years of military and oil industry leadership experience.

Q: What are some of the biggest issues when a small-business owner wants to retire and pass the business to his or her children?

A: Family alignment: The owner will not live forever, but the business can. There is nothing more important for an owner than planning the future success of the business and the family. The owner must be prepared for an honest and realistic conversation with the family about their vision and goals for the succession and legacy of the business.

Finances: The successor(s) must have the resources and skills needed to buy and sustain the success of the business.

Timing: Set a target date and prepare the leadership team to be ready on that date. The owner must have a plan and be ready to let go and step away.

Who: Selecting an internal successor who has the desire and has demonstrated their willingness to do the work needed to be as or more successful than the current owner.

Successor readiness: The successor and the new leadership and management team must be ready to sustain the success of the business. The successor has been trained and ready to be a successful owner and leader. Transferring as much owner's knowledge takes planning, time and mentoring. A career development process proving key business skills in a range of real-world situations, challenges and assignments compliments the readiness process.

Q: You say business owners often turn to a third party for help. What kind of a third party, and how can they help?

A: Develop a team of advisers to include: The company CPA (financials, tax planning, valuation/appraisal); attorney (business transfer, tax laws, estate); business coach (owner accountability, leadership and team development, process and systems, increase business value); financial adviser (retirement, wealth and estate plans); insurance advi! ser and others as needed.

Q: What's the best-case scenario and what's the worst when it doesn't work out?

Best scenario: The succession process aligns all key players, inside and outside the operation of the business, and agrees to sustain the growth of the business and implement the intention and vision of the owner. The next generation is innovative and acts as a cohesive ownership team to grow the business while preserving and strengthening the legacy of the family based on values.

Worst scenario No. 1: The owner is unable to transfer ownership to the family as planned prior to the death of the owner. The transfer to family is complex and takes longer than expected so if the owner is incapacitated or dies, the potential disruption or failure is a serious risk.

Worst scenario No. 2: The family business self-destructs due to family dynamics, internal rivalries/infighting, loss of trust and conflict among the family before or after the succession plan is implemented. There are no clear criteria, standards and rules for managing the business toward successful growth.