- by Sophie Pinkoski

Unexpectedly inheriting a family business is rarely a straightforward process. The decisions that come with such an immense sudden change in your life are complex and deeply personal. It’s understandable if you’re feeling conflicted and overwhelmed at the prospect of everything ahead of you. There is no one-size-fits-all answer. The right choice is going to be unique to you, your family, and your business’ specific needs.

Sudden inheritance of a business often comes with a lack of succession planning, especially surrounding an owner’s death or illness. Family members and employees are each going to have their own opinions about what should be done with the business. Some of those individuals may feel you are ill-equipped to take on such an important responsibility, and their self-interest may not come with the best of intentions. Don’t let anyone exploit the vulnerability that comes with your lack of experience with your business. There are people around you who know the business well and can help you navigate through the complexities of running the company while you weigh your options for what to do next.

Get to know the business so you can make informed decisions moving forward.

The emotional, professional, and financial factors that influence your choices all come together to create the big picture of what is needed and what you, your family, and employees are capable of taking on at this time. The business’ health will be a significant determinant of this, especially when considering what your family is able to handle in maintaining the business’ stability through an uncertain time. Your own emotional state will also sway your decisions. Preserving the family legacy is incredibly intimidating, and you may worry about letting everyone down by making the wrong decision. Choosing not to keep the business in the family may be guilt-ridden, even if it winds up being the best option for the business. Losing the owner is already a heavy blow, but letting the business go is a loss in itself. You may hesitate to sell for this reason. On the other hand, keeping the business may feel like the only way to keep tensions within the family from exploding. 

Whatever choice you make, you should assess what role you want to take in the business.

You don’t have to stay owner or operator of the business if those paths aren’t right for you. Consider the extent of involvement you want to partake in the business. Whether you’re considering stepping in, stepping back, or passing the torch, this new journey is more than just about the business. It’s about making the right decision for you, your family, and the future.

Here are some options you are likely to consider when unexpectedly inheriting a family business:

Running the business yourself–– It’s important to take the time to find out how you fit into the business before making any formal decisions. Your first instinct might be to carry on the legacy passed down to you, but that might not necessarily be the best option for you or the business. This will, however, be a natural progression for you if you already have experience in the company. Being already well-versed in the ins and outs of the business gives you psychological ownership, given your strong connection to the work. Whatever the level of involvement you had prior to inheriting the business, now is the time to assess your skills, capacities, and interest. This will help you determine whether you are taking on the business for the right reasons, and not just out of a sense of obligation.

If your skills and interests don’t align with the business, don’t force yourself to do something that won’t bring you joy.

If taking on the business yourself is a serious consideration for you, determine what kind of leadership style you want to implement. This will set up your business’ culture under a new leader. Putting something like this in motion as early as possible puts your employees’ minds at ease while things are still up in the air.

Keeping the business under professional management–– Inheriting the business doesn’t necessarily mean you have to operate everything yourself. You may get involved with the business and find daily management isn’t for you. You can stay involved to protect your family’s legacy in other ways. Owning the business gives you flexibility without the burden of operational responsibility. Hire an experienced leader to run the business, then decide how active you want to be in the decision-making process. Perhaps you want to be involved in board oversight, or you want to step back with quarterly check-ins, or simply limit yourself to a passive ownership role.

Whatever your level of involvement, be sure to protect your interests by creating a legal framework to retain control over key business decisions while still giving your team operational independence.

The biggest concern while considering this option will be whether the business generates enough income to make passive ownership worth your while.

Passing on the business to the next generation–– A huge incentive for some families is to keep the business in the family would be to pass it on to the next generation. Taking on the brunt of the financial responsibility protects those assets for when the next generation are old enough and prepared to take on the business themselves. This gives them time to learn the ropes, develop their skills, and understand the risks and challenges that come with leading a business. In the meantime, you can get a better sense of which of these younger family members emerge with particular skills and interests that could benefit the business. Maintaining either ownership or management yourself gives the next generation an excellent example of what they too could achieve one day, thus ensuring the family legacy lives on into the future. That said, does the next generation really want to have a career in the business? If they are young now or not showing interests, is the better path to sell the business and not burden them with it? 

Selling the business–– This option might have been part of your family’s discussion prior to succession. There are complexities tied to this particular option, largely in the type of buyer you want to attract. A family buyout will mean selling the business to current employees, to organizations within your market, or other external investors. The right buyer will depend on the size, structure, and profitability of the business. Part of your initial exploration of the business will be assessing its market value with your professional advisors (e.g., business, tax, legal, accounting).

Selling the business may be a daunting choice, especially with your family’s legacy in mind, but there will be other opportunities to honour that legacy outside of the business.

Selling brings you financial freedom to invest in new projects and personal goals. In that sense, it opens doors to expand your family’s legacy in new ways you may never have considered before. If you’re uninterested in running the business and require stability for your family by way of financial liquidity, this might be an ideal option for you.

Your family business has its own unique history and trajectory that has made it what it is. It comes with a legacy that can be built upon in many different ways, whether you choose to keep the business or not. You know what you’re capable of and what you, your family, and business need most. Make informed decisions based on these factors, and make sure it’s for all the right reasons. Remember, you don’t have to take responsibility for the business just because it was handed down to you. Don’t feel pressured to run the business yourself if it’s not the right choice for you. Take stock of your options to do right by the business. If you find selling is the right choice, know that your family’s legacy is in more than just the business itself, it’s in how you build your future together.

Further Reading

Surprise! You Just Inherited a Business, Venture First

What to Do When You’ve Unexpectedly Inherited the Family Business, SCORE