Preparatory work, which was initiated early enough, makes it possible to ensure that the outcome is as good as possible from the point of view of the company, the resigning entity, or the prospective entity. The aim is not only the development and growth of the family business, but also the maintenance of a good spirit of collective and personal relationships between the family or relatives.
Generational transfer is much more than signing the deed of gift or sale and purchase agreement, which technically transfers the ownership to the successor. Instead of a single measure, generational transfer is a process that at its best includes the following steps.
Planning the generational transfer should begin at an early stage - a rule of thumb is for at least five years in advance because of technical preparations. What options are available when the current generation of entrepreneur quits activities? Can we find suitable business successors? If not, what alternatives are available in this case?
Even if the entrepreneur has children who can continue the business, it is necessary to openly investigate whether they are genuinely interested in continuing the family business. It is also important to know what kind of support or training the next generation needs.
The expectations, potential, and needs of all parties should be carefully examined.
Choosing the suitable and appropriate method for generational transfer depends on, among other things, the nature of the business activities and requirements set by the business, the family's intentions and internal values and rules of play regarding ownership and ownership transfer. Also, the different options in tax treatment play an essential role in deciding the method of implementation.
In many cases, ownership is transferred to the next generation either as a trade or a gift, i.e. a trade or gift certificate must exist as a practical measure. In the same context, it should also be ensured that the articles of association and shareholders' agreements for all companies involved are up-to-date. Also, currency of wills and premarital agreements should be checked at the same time.
In our experience, the owners' shared view of the issues to be settled is the key to the success of a generational transfer, the survival of the family and the sustained growth of the company. We work with a common vision with the owner families in confidential and thought-provoking workshops combining inclusive coaching methods and experience-based consulting. According to the feedback we’ve received, the models and decisions that have emerged through honest interaction with the help of an external shooter are the prerequisite for successful generational transfer. Together with power, ownership and responsibility posts also must be transferred - models done in collaboration is the key to success here.
In order for the company subject to a generational change to be able to work optimally after the generational change, it must be ensured that the business continuator or the prospectors have the best possible conditions to continue the business. The situation is usually new to the successors, so there may be a need for coaching or consultation. On the other hand, the situation is likely to be new to the abandoning party, who may also require consultation and support. It is also a good idea to ensure that the resigning entity gives the successor enough room to guide the business in the direction they deem appropriate.
Our experts have long-term and in-depth experience with family businesses and owner-led companies operating in Finland as well as internationally. We have been helping companies, entrepreneurs and owners with numerous generational transfers - from preliminary planning to the final stage to ensure that the generational transfer has been achieved as planned - and everything in-between. We are happy to discuss in more detail what the correct way to implement generational transfer in your company would be!
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