Every succession book tells you how to hand the business to your children. Almost none of them pause on the question that should come first: should you?
Every succession book tells you how to hand the business to your children. Almost none of them pause on the question that should come first: should you?
James Lea, who advised family firms for decades and taught at the University of North Carolina, put that question at the front of Keeping It in the Family (1991), and it is still the most skipped step in succession planning. Before you draft a single handover document, Lea says, you analyze three things: the business, the family, and the owner. Then you answer, honestly, whether this business should stay in the family at all. Plan succession first and ask the question never, and you can spend ten years grooming an heir for a company that should have been sold, or selling a company an heir would have carried for forty years.
This is a two-hour meeting. It needs the owner, any co-owners, and a notepad. It does not need the children yet, because the first draft of honesty is easier without an audience. Here are the three worksheets, the exit paths if the answer is no, and the one rule that governs everything if the answer is yes.
The question underneath: is this a business worth inheriting, or a job wearing a company's clothes? Score each line 1 to 5, where 5 is strong.
Business Analysis: [company], [date]
A total below 21 does not automatically mean sell. It means the thing you would be passing on is currently a fragile job, and an inheritance that requires the heir to be a hero is a burden with a letterhead.
The question underneath: is there a willing and able successor, or only a conscripted one? Lea's sharpest insight is that heirs are customers, not conscripts. You market the business to them, and like customers, they are free to walk away. He also points out what the next generation usually sees of a family business: the missed dinners, the stress, the father's back going out the door. If that is the whole advertisement, do not be surprised when nobody buys.
Score 1 to 5 again.
Below 18, you do not yet have a succession problem. You have a recruitment problem, and possibly a family that would be happier owning the proceeds than the company.
The question underneath: can you actually let go? Lea compares the handover to a trapeze: at some point you must release one bar to catch the next, and the owner who keeps one hand on the old bar brings the whole act down. Answer these in writing, because saying them aloud invites your own spin.
Lea's research and every advisor's case files agree: the owner is the most common point of failure, ahead of the heir and ahead of the market.
Put the three worksheets side by side. If the business is weak, the family unwilling, or the owner unable to release, the honest answer may be no, this business should not stay in the family. That answer is not a failure. It is the finding that saves everyone ten expensive years.
Sell well, not eventually. A business sold from strength, with clean books, documented processes, and the owner still healthy, commands a real price. A business sold by a widow during probate commands scrap value. Start dressing the company for sale two to three years ahead: audited accounts, contracts in the company's name, at least one manager who can run a month without you. Budget a year for the sale itself.
Convert the proceeds into the channels that do stay in the family. A company is only one vehicle for a legacy, and often the most fragile one. Sale proceeds can fund the sturdier channels: education, the asset no court fight can claw back, through paid-up school fees and education funds for grandchildren; and titles, meaning land and property with clean, registered ownership that can hold value across a generation with far less management than an operating company. A family that sells a shop and buys a titled plot plus three completed educations has not ended its legacy. It has moved the legacy into stronger containers.
Say it out loud. Tell the family the business will be sold and why, while you are alive to explain it. Heirs can forgive a sale. They struggle to forgive a surprise.
Lea's rule for the families that stay in: somebody has to be the boss. One successor, named, with real authority, on a written timeline. Committees do not run companies, and neither do truces between siblings. Choosing one boss will disappoint someone, and the disappointment is survivable in a way that a leaderless company is not. Balance it in the estate, not in the org chart: the non-boss children can receive other assets, dividends, or board seats, but the top job is singular.
And write everything down. Lea warned that good-faith promises around succession have the legal muscle of a jellyfish. The name, the date, the handover stages, the owner's exit package: on paper, signed, witnessed. A verbal promise from a founder is a mood, and moods do not survive probate.
Revisit the three worksheets every three years, because the honest answer can change. A no can become a yes when an unexpected heir steps up. A yes can become a no when the market moves.
Book the two-hour meeting nobody wants. Owner, co-owners, three worksheets, no children yet, phone calendars out right now. Whatever the scores say, you will leave that room with something most business families never get: a succession plan pointed at the right question.