It can take years for contractors to build successful business relationships and a solid reputation, so the transfer of a company to a family member requires thought and preparation, according to constructiondive.com.
A 2021 survey of construction owners showed 50% of respondents reported they do not have an ownership transfer plan. Some aging construction business owners may not realize the need to develop a succession plan or are not sure what steps to take.
Frank Williamson, CEO of Oaklyn Consulting, Chattanooga, Tenn., offers the following tips to help start the process.
- Begin the conversation with your family. Some businesses do not survive the transition from first- to second-generation ownership. It is important to have a transparent conversation with your children to ensure you agree about the future of the business. Make it clear there are alternatives if they do not want to be in the business.
- Work to resolve disagreements within the family. Multiple family members may have different visions for how to run the business. Such disagreements are common and can permanently damage family relationships and the business if they become more serious. Establish a family pact regarding basic guidelines for behavior at work and how to resolve disagreements.
- Decide on a gift or sale. If one or more family members is truly interested in taking over, you must decide whether to give the business to them as a gift or structure a sale. The answer may depend on whether you want the sale proceeds to fund your retirement. Some buyers might pay a lump sum with the help of seller financing, or a monthly series of payments could be used to provide ongoing income for the seller. However, if the business has debts or other liabilities, a gift can be an easy way for an owner to transfer those responsibilities provided it is clearly communicated. Create a business ownership agreement to establish a timeline for the gradual transfer and eliminate confusion regarding control.
- Start preparing your successors. It can take years to groom successors, so identify the various roles and who will fill them as early as possible. Look for gaps in skills or knowledge so you can address them. Ensure your successors are client-facing and can begin building relationships strong enough to last after your departure.
- Seek professional assistance if needed. Transferring ownership of a business can be complex, so you may choose to hire an independent third party who can help with the details.
Do not wait until retirement to start planning the future of your business. Beginning the process as early as possible can give you time to make the necessary decisions.
NRCA’s Future Executive Institute participants gain valuable knowledge regarding family businesses and succession planning. Learn more about FEI.
