Owning your own business has brought you much joy over the years. You have watched your business grow from its humble beginning to a successful company. As you are starting to get older, you realize as much as you enjoy running the business, it may be time to pass it on.

Creating a business succession plan helps ensure the future success of your business. It also gives you the opportunity to keep your company in the family. Here is what you need to consider when passing a business on to family members.

Pick your successor

Naming your successor is the most crucial decision. If you want the business to remain within the family, you may be looking at your children or nieces and nephews. You should not name your oldest child the successor just because he or she is the oldest child.

Make a list of skills you need to do your job. Assuming the potential successors already works for you, think about the things they excel at and compare these to your list. You will train your successor, but you want to ensure the person you pick has an aptitude for the skills needed to do your job.

Once you have picked your successor, let him or her know. You will also need to tell the rest of your family about your decision. Communicate the reason for your decision clearly.

Determine compensation for other family members

However, before you make the announcement, determine how you will compensate the rest of your family. Maybe there are other management positions to fill. You could also divide shares of the business or offer seats on the board. There are a variety of ways to divide the business interests between family members. Outline all these terms in a contract, so everything is legal, and everyone's interests are protected.

Set up a timeline

Figure out a timeline for transferring ownership to your successor. You need time to train him or her in all areas of the business. As you train him or her, remember he or she is learning, so mistakes will happen. Accept this, and allow your successor to learn from these mistakes. Do not drag the training on too long either. Once you set an end date, stick to it.

Make sure you are financially covered

Before you retire, you need money to do so. If all your money is tied up in the business, you may be nervous to give up control. Reach out to a financial adviser, and figure out how to appropriately diversify your assets if you have not already done so.

Picking a successor is a big decision, particularly if you are naming someone within your family. However, it does not need to create family drama if you communicate your wishes clearly and provide compensation to the rest of your family. After you have come up with a succession timeline, make sure you stick with it, and train your successor carefully.

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