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tips for having your kids take over the business

recently saw “Major Barbara,” a George Bernard Shaw play about a Salvation Army majorette who eventually inherits her estranged father’s munitions business. It reminded me of how entrepreneurs often worry that their kids lack their entrepreneurial drive or ambition.

One subplot focuses on the father deciding which of his three grown children, raised by their wealthy mother, are fit to inherit his business. Two of them, he decides, are too out of touch and lack the work ethic to carry on his legacy.

He chooses Barbara for her clear disregard for her inherited wealth, her leadership in the Salvation Army and because her husband was an orphan — someone he figures will understand what working for a buck means.

Business owners concerned that their well-off heirs will be ill-equipped for business ownership can teach them the value of hard work and the drive needed to run a successful company. Ira Bryck, director of the University of Massachusetts Family Business Center, recently offered some advice:

1) Teach kids the value of money from a very young age. Start by giving them an allowance. Also teach them exactly how the business makes money. “There are a lot of people who work for family businesses who think you just show up and make money,” Mr. Bryck says. (Read this Wealth Report post on teaching wealthy offspring the value of money.)

2) After college, have them work outside the business for three to five years to gauge their strengths, weaknesses and work ethic.

3) Grown kids interested in the family business should be assessed for their leadership abilities as anyone else. When choosing a successor, interview nonfamily employees and outside candidates, and assess your children using the same criteria.

“If it’s a tie, then the family member gets it,” he says. If the nonfamily candidate is clearly better-suited, encourage the family member to do something else. Some companies and family-business centers can offer leadership assessments for family businesses.

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