By Ryan Velez
We talk a lot about generational wealth and the role it plays in the racial wealth gap. While many Black families are starting out with less, they are managing to create some decent money for themselves via small businesses. But how does small business success become generational wealth for the future? Black Enterprise explains how succession plays an important role.
Eric Davis has run an Image One Facility Solutions franchise for five years and is currently in the process of handing the reins over to his son, Gregory Pratt. “’He has worked hard and studied this industry,” Davis says. “He will make our family business into a great generational business.” To do this, Pratt has worked alongside his father for nine years in various jobs, and the father has taught his son many important skills, like reaching out to the franchisor for support and treating both customers and employees well. While they have a succession plan in place, this isn’t the norm.
Some three in five small businesses do not have a business succession plan in place, a Nationwide Small Business Survey shows. An online Harris Poll survey that included 502 U.S. business owners with less than 300 employees also revealed that 47% don’t believe a succession plan is necessary.
Davis suggests entrepreneurs contemplating succession should form close relationships early with lawyers and accountants who can help with that process. “I have a team of people in my network who offer me professional services that I’ve been working with for a long time who will help him [Pratt] too.” He has also provided a list of tips for Black Enterprise readers that is as follows:
-Do your homework; figure out how much money it will take to keep the business operating. Where will this money come from?
-Determine who will be in charge of making sure the succession plan is carried out properly.
-Figure out what strategy will be used to groom someone to take over the business.
-For family businesses, Davis suggests making sure you select the right person to run the business. The reason, he says, is that all of your children, for example, may not be interested in taking over the business.
-Don’t wait until the last minute to plan a succession. Some experts suggest business owners establish one several years before beginning the process.
-Make sure the business is strong financially and know where the money is.
-Find out from your accountant if the business has a lot of debt or tax liabilities before doing the succession.
Finally, teach the new owner the importance of giving back to the community through donations and employment opportunities.