The homebuilding industry is a traditional one, as a 2019 PwC survey suggested that ⅕ of construction and remodeling company owners plan to pass their business along to the next generation. With family members involved in your company, you likely have a lot of shared trust, respect, and goals for the future of your business. Still, passing down your company to someone else is never easy, and there are several key aspects to consider when relinquishing control of your family business.
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There is certainly no shortage of nightmares about family members taking each other to court or going years without speaking to each other due to business matters. There is also the startling fact of how few businesses make it to the second generation, and a majority of these failures can be explained by the problems that occur when passing control to a successor.
Luckily, CLB Network has experience in this process, and we provide our clients with a clear understanding of the process, market conditions, strategic drivers, and all the available options to meet the needs of your family. We want to help you maximize the value of your company, and make sure it succeeds in the hands of the next generation. This blog post will give you all the information you need to successfully transfer operation of your family business and will walk you through what the process looks like with CLB Network.
Sometimes the choice is easy, but most of the time, the options seem endless. The first thing you need to do is narrow down your candidate pool and select your top choice, and then see if they’re interested in the job. You might even have two family members who want to take over, and you’ll have to decide if you want to split the ownership in two, or choose one candidate over the other. This can be a difficult process, especially if your children are involved. If two of your children want to take over the company, but you’d prefer just one leader, you can ask them to settle the dispute amongst themselves. However, sometimes for the sake of your company, you must make the final decision.
It’s essential to start training early on, even years before you leave the company. You and the other members of your team need to work closely with your successor. Make a plan for what skills you want your successor to excel in, and talk to different members of your team about who is best to teach them certain skills. Don’t forget to introduce your family member to people outside of your business as well. This includes your banker, lawyer, and suppliers. After the initial introductions are made, step out of the way and let your successor continue to build those key relationships. If training goes well, your family member will be ready to take over your company exactly when you feel ready to retire.
Sufficient life insurance is needed to help your successor cover estate taxes as well as ensure adequate funds to continue running the business. Additionally, it’s important to think about how you want to divide your assets. It’s often best to leave your company to the family members who are the most active in it currently. That way, you know they’re interested in it and deserve to continue working there. If you’ve picked one successor, be clear that they have the final say in the company; this will help avoid future conflict and give authority to one voice. And if you don’t already have a will, make one as soon as possible.
These include an excellent management team, business operating systems, a well-established and diverse customer base, appearance of the facility consistent with price, a realistic growth strategy, effective financial controls, and a stable and increasing cash flow. Our expert team has developed a seven-step process to help sell your business and we will be by your side the whole time, while providing you with a clear understanding of all the key factors to consider, including market conditions and strategic drivers. Our experience, strategic approach, process, and experts are equipped to get the job done and will help you maximize the value of your company.
Contact CLB Network today to talk to our trusted advisors about passing on control of your family business and fill out our builder business benchmark to get a head start on properly planning your legacy, exit strategy, and assessing the saleability of your construction business.
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