June.6.16Family Finance
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Money Matters with Nimi
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Most family businesses fail after the founder exits because there was no plan for the transition. Here are 10 tips to help you through the process of handing over your family business:

1. The earlier you start the better

Experts suggest that succession planning should have begun at least five years before the founder plans to retire. This will give the younger generation time with the founder in the business so they can confidently take over when the time comes.

2. Look at the structure of the business

If your business hasn’t been properly organized with formal structures in place, this must be done
before you can even consider a seamless transition process.

3. Be as fair and balanced as possible

Don’t create tension from the onset by favoring one child over the others. This leads to acrimony and
deep-seated resentment. Often sons are favoured over daughters. Be careful not to favour the
children in the business over those that are not. Above all competence and interest are of primary
importance.

4. Discuss with your family

There should be open communication on both sides. The founder should make it clear what their intentions are whilst the children should also indicate if this is indeed what they wish to do with their lives. Don’t let things fester.

5. Educate Your Children

Once you identify the successor, as far as possible you should strategically educate them to be well
Relevant or complimentary first degrees, professional certifications and Masters Degrees, preferably
an MBA are excellent tools to strengthen them.If your family member is not qualified to be in the
business, let them stay out of it. Do not promote your offspring beyond their competence level.
Place relatives as you would any other employee, that is, in roles that are appropriate to their
capabilities.

6. Position Your Successor to Grow Through the Ladder

Introducing your child as an Executive Director to early is a mistake that is often made in Nigeria; let them grow through the established hierarchy. Let them earn their promotion so they gain the respect and credibility that they need to succeed.

7. There should be complete clarity of roles.

When multiple family members are involved in the business, this can result in much overlap and
blurred roles. There must absolute clarity so each person fully understands what is expected of them.

8. Stay close to the numbers

Many family businesses can be very casual about the numbers and are already in grave trouble
before the deep- seated issues that result in their demise are identified. Monitoring the numbers is
crucial. The financials must be in capable qualified hands.

9. Make sure legal documents are properly drafted and executed.

Don’t forget the legal aspects to reduce the possibility of a horrid family feud brewing in future. There
are so many emotional and practical issues in handing over a family business; it should be part of
the overall estate planning process.

10. Stay connected for a while

Don’t hands off too soon. Even after you hand over, stay connected; your guidance and advice
would be very much needed and appreciated in the capacity of a consultant or advisor to the
business until things settle.

Photo Credit: “Cincinnati Estate Planning Attorney”

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