When you're ready to pass on your business to your family, it's important to make sure that everyone is on board and understands the challenges that are ahead for successful exit planning.

Some of the most common challenges owners face in succession planning when transferring their businesses to their family (or multi family office) include:

- The new owner might not be as dedicated, hardworking, or skilled as the previous owner.

- They may not have the same vision for the business as the original owner did.

- The new owner might not have a deep understanding of how things work in a corporate development or how to run a business from day to day.

- There might be issues related to succession planning, such as choosing who should take over when they leave or which members of their family will inherit their shares in the company.

While many owners are worried about losing control, diligent business exit planning is key to ensuring that everything goes smoothly. There are many ways to maintain ownership while still giving family members a stake in the company. You can create a succession plan that allows you to transfer ownership gradually over time to avoid disrupting operations and giving family members time to learn the ropes.

You should also consider creating a buy-sell agreement that outlines what will happen if one member dies or becomes incapacitated and cannot work in the business anymore. The deal origination agreement should include how much each person has invested in the business, how much they're entitled to receive when someone leaves or dies, and how much each person gets paid for their work in the company (this is called an "incentive").

We asked our BizNexus Community Advisors of M&A advisors and professionals what they see and experience when dealing with family succession planning.

Read below to see the challenges they often see in deal origination with family.

Challenges Owners Often Face when Transitioning Their Business to Family & Multi Family Office Deal Origination

Business owners wait too long to have a serious conversation with family members until it is too late.

• Randy Hendershot, Business Intermediary @ Evolution Advisors

Business owners that don't train and prepare the next generation on capital utilization and overall financial management.

• Steve Denny, Business Broker @ Innovative Business Advisors

Trouble letting go and allowing the next generation take over.

• Frank Byskov, Wealth Manager @ Forty4Financial

Business owners don't prepare for this and don't know there are options besides leaving the business to a family member. You have options and need to learn what they are before this happens.

Curtis Stohr, Trainer @ Family Investor LLC & Owner of Coffee With Curtis

In some cases, the kids simply are not interested. When they are, sometimes they simply are not prepared for the opportunity. Some of the most successful scenarios occur when the business owners encourages the kids to take jobs at other companies (early in their careers)  to gain some perspective before coming to work for the family firm.

In the scenario where there are no kids, other family members should be viewed the same as any other potential management / owner candidate. If they are up for the task, then it can be really good. However, it should not just be handed over simply because there is a shared family name or line. It's a recipe for disaster if that happens. That benefits no one. 

• Dave Sheppard, CMAA @ Medworld Advisors

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