The sentimental favorite! So many entrepreneurs dream, perhaps secretly, of passing their business on to the next generation. If you can make this stardust covered dream come true, it’s a lovely option. Unfortunately, more often than not succession does not pan out. I’ve read that 70% of family businesses do not survive the transition from the founder to the second generation.
Family rivalries and other dysfunction often intrude to tank the business. Sometimes the owner refuses to cede control (like Queen Elizabeth II, whose ego prevents her from stepping aside so that Prince Charles can do the job for which he’s trained his entire life). Other times, the youngsters get a little power mad and want to take over before they know what they don’t know.
As with a business sale, get the financial records in order, maintain business property and equipment, call in your accountant, attorney and appraiser and share information. Family members deserve to know what they’re getting into.
It will be very important to distinguish between the company managers (perhaps one child or two) and the company owners (all the children) and make sure that no one feels devalued. Remember that you’ll want Christmas dinner to be a happy occasion!
I strongly recommend that you consult a family business specialist if you’d like to pass the business along to family members. Being able to groom your hand picked successor is a wonderful thing. Recruit a specialist to help you choose the candidate who is best qualified to assume the reins.
INITIAL PUBLIC OFFERING
If your business has grown substantially and is poised for still more significant growth, provided that a major infusion of cash can be raised, then offering publicly traded stock in the company may be the best strategy. I’ve included IPO in this section, although the entrepreneur may remain within the company after it has gone public (or not).
Preparing your company for an IPO is an intense piece of business. A couple of years ago, an acquaintance of mine took his biotech company public and damn near found Jesus in the process!
You’ll need an investment bank to underwrite the offering; a magnificent business plan that portrays your company and its growth potential in an excellent light (but does not oversell); and a first rate IPO attorney. The Securities and Exchange Commission governs the proceedings.
If you’ve done everything right and have fortune on your side, your stock might even sell and bring in the growth capital that your company needs. You might even get rich: the value of the stock sale may far exceed your original investment in the business. However, you may not be able to jet over to Dubai and buy an island just yet.
Major investors may dictate that nearly all cash raised through the IPO must be reinvested in the business. Moreover, a portion of the owner’s share may be held in escrow for a period of years. If that’s not enough, the owner’s role in the business may be greatly diminished. That may suit you just fine—or not. Are you ready to give up control to a bunch of outsiders who may not share your vision or priorities?
So there you have it, a business plan guide that I hope will give you the inspiration to get started on a business venture for yourself. I’ve left out a couple of elements, such as Operations and Executive Summary, but I feel that you have the tools to build a plan that will launch a successful business. Good luck!
I’ll be back next week with a new topic. I hope you’ve enjoyed the series!