Does your small business have a legacy plan?

I've been in mourning for most of the past week since Paul Newman passed. No I didn't know him personally, but I met him when I was in college. I had a wonderful summer job back then. I worked for an awesome elderly woman, Judy Streete, who owned Apple Pie Farm in southeastern Pennsylvania. I weeded the herb fields on Mrs. Streete's 14 acre farm. That's where I met Mr. Newman. He purchased herbs from the farm for Newman's Own. Since he was hands-on owner of his company he liked to visit the places where his ingredients came from.

I remember being way out on the field the day he came. I could see Judy's bent frame leading a tall man and woman (Joanne Woodward was with him) out to the harvesting house. I swear I could see his shining blue eyes from my weeding spot. Anyway, he asked Judy to call the field workers in to the harvesting house, so I did get to meet the Newmans.

What I took away from that meeting was more than just the wow of shaking hands with a famous actor and being dazzled by those blue eyes. Paul Newman was a man of integrity who sought to do good in the world.

Paul and Judy were very much alike. Both were involved in every detail of their work and both did all that they could to ensure quality. They both built strong/healthy businesses. Because a plan wasn't publicly announced CNNMoney.com ran an article wondering what would happen to Newman's Own now that the highly-involved owner was gone. I can't claim to know, but since Mr. Newman had been sick for several months and was in his eighties I'd guess that his family and business partners had a plan in place.

That's where Judy and Paul may have differed. Again, I'm speculating. But Judy Streete was in her 90's when I worked for her. As far as I can tell none of her family or employees took over her business. I've tried to Google her name and the farm and have come up with nothing. It's sad to see a business built from scratch--literally, Judy started her business by selling homemade apple pies--fall away after the creator passes on.

The Small Business Administration estimates that one-third of family-owned businesses will survive the transition from the first to the second generation. If you manage to clear that hurdle, higher ones lie ahead. The Family Firm Institute says only 12% of family-owned businesses stay viable into the third generation, and only 3% are alive at the fourth-generation level and beyond.

It's important to your business to have a legacy plan not just for the sake of passing on the family business. If something should suddenly happen to you how would that effect your business and your family?

Some things to consider:

Don't expect that your children will take it on

For any number of reasons it's common that children of business owners want nothing to do with the family shop. Have someone outside of the family who you trust get to know the business well.

The dinner table is no place for a board meeting
Keep family and business separate. Mixing the two will turn your life into all work and no play and bore your family away from the business.

Make them earn it
Your family will appreciate the business more if it's not just handed to them. Don't hire family members until they've gained experience in someone else's business. They'll come back with new skills and perspectives and get used to being paid what they are worth.

Choose a successor early

Decide who will take over the business by selecting the person who is most interested and passionate about the job. Don't assume your spouse or oldest child will want it. Make your plan known to all the key players: family members and top employees. This will cut down on speculation and bickering.

Deal with hit head-on

The most important thing about a legacy plan is to have one. Maybe it's in your head or you're "just sure" that the kids will work together and take it over. Don't leave it to chance. You may even think of making a legal statement in your will with instructions of what should happen with your business. Don't leave it up to anyone else to decide.