5 Questions to Answer Before Setting up a Family Business

If you have a son or daughter with a strong entrepreneurial bent, you may be dreaming of setting up a family business. Did you know that you can do this through franchising? In fact, according to the International Franchise Association, about 30% of franchises pass to the next generation. Before you settle on franchising for your family business, however, there are some key questions you should answer.

Is your child on board?

This is the first and most important question. If your child is not on board with the idea of a family business, it’s going nowhere. As you might expect, this is not a question you can answer when your child is young. Your son or daughter probably won’t be prepared to commit to a family business until they’re at least in their twenties, possibly even later. You can still purchase a franchise before then–just don’t assume your child will be willing to take it over when you’re ready to retire .

To make sure your child is truly on board, you’ll both need to be transparent with each other. Have honest conversations about issues such as startup costs , salaries, division of responsibilities, who has the final say in decisions, and when you expect to exit the business. And remember: these conversations should not be a one-time event. You’ll need to revisit them periodically, especially if unexpected circumstances arise (and in business, that’s pretty much guaranteed to happen).

Is your child capable?

Your child’s willingness and their abilities are two different matters. Plenty of people love the idea of being a successful entrepreneur , but not all of them can fill that role. Be honest with yourself about whether your child has the skills to be a good business partner and business owner.

They don’t need have to have an M.B.A or business experience , though those can be helpful. But they do need to have certain qualities and soft skills to serve as a foundation for successful entrepreneurship. They should be quick and eager to learn , smart with money , good at solving tough problems, persistent in the face of challenges, and able to collaborate with others.

Is your franchisor on board?

Once you know your child is on board and capable, you’ll need to find a good franchise fit. Not all franchises will work as a family business. Some franchisors simply don’t allow transfer of ownership. Others may want to review your succession plan, reserve the right to fire your successor, or require some kind of transfer payment.

If you want to set up your franchise as a family business, prioritize that goal in the discovery and awarding phases. Make sure your franchise consultant (if you’re working with one) knows that you’re looking for a transferable franchise you can work in with your child. Ask about transferability when you talk to franchise leadership or current owners, and carefully examine the transferability clause in your franchise agreement.

What’s your succession plan?

Dramatic TV shows about business succession may be fun to watch, but you don’t want to live like you’re in one. If you want your family business to survive beyond the first generation, you must have a succession plan . Not just a general idea of how the handoff will happen, but a clear written plan.

Experts recommend that business owners start succession-planning 5-10 years in advance. The earlier you make your plan, the more time you have to equip your child to succeed. It’s also important to share the plan with your spouse, any other children, and your employees. Depending on the terms of your franchise agreement, you may also have to share your plan with your franchisor or even get their approval. Sharing your plan doesn’t guarantee a trouble-free transition, but it will reduce the likelihood of legal challenges or other squabbles.

Create the succession plan in collaboration with the child who’s going to take over the business, so that it makes sense to both of you and meets both your needs. It should outline when the succession will take place and the process by which your child will take gradually increasing control of the business. By the time the official handoff happens, the transition should be a small change, not a big one.

Are you prepared to relinquish control?

After the first question on this list, this question is next in importance. The transition will not be successful if you are unable to step back and let your child run the business. And remember: you have to take that step gradually. You must be willing to relinquish control of significant parts of the business while you’re still working in it. Your desire for the business to continue has to be stronger than your desire to stay in the driver’s seat. When the founder of a family business is unwilling to let go, the business usually doesn’t succeed in the second generation. But if you plan carefully and give your child room to flex their entrepreneurial muscles, you have a solid chance that your legacy will continue .

As the son and grandson of entrepreneurs, I’m familiar with the challenges and rewards of running a family business. If you’re interested in starting a family business of your own through franchising, schedule a call with me . I can provide a customized plan to help you find the right franchise for your goals. Best of all, my services are always free!

This content originally appeared on https://empoweredfranchisee.com/ .