Succession planning is a crucial part of family business ownership and wealth creation, yet many families wait until it’s too late to start planning. The process of passing a business to the next generation can be daunting, but with the right planning and guidance, it can be a smooth transition that benefits both the family and the business.

One such family business is Tri-State Underground, founded by Rick Hess at the age of 24. Today, the business has grown to have 19 employees and clients all over the First State, Maryland, Pennsylvania, and New Jersey. At age 60, Rick Hess is beginning to think of life outside of the business and has enlisted his son, Ricky Jr., to handle day-to-day operations.

Succession planning should ideally begin before any second or third generation joins the business, according to Margo Reign, Business Advisor at the Delaware Small Business Development Center (SBDC). Reign advises families to start working with an accountant and an attorney to ensure that practical and emotional aspects are covered.

On the practical side, Reign advises businesses to start work with an accountant and an attorney to ensure that buy-sell agreements and life insurance policies are in place, and easy-to-access records of financial statements are maintained. These documents help in the company valuation and can help pay for business expenses in the worst-case scenario of a death.

On the emotional side, it is important for families to have conversations about expectations on transferring the business, clear criteria for bringing family members into the business, and planning what the founder will do in retirement. Lack of communication is one of the biggest challenges in succession planning, and families should ensure that everyone is on the same page.

Succession planning is not just about ensuring a smooth transition of the business to the next generation, but also about creating generational wealth. By planning for the future, families can create a legacy of financial stability and growth that can benefit generations to come.

To learn more about succession planning and family business ownership, join the Power Tour, a platform for family financial literacy and wealth creation. The Power Tour is a series of events, resources, and mentorship opportunities aimed at empowering families to take control of their financial future and create generational wealth.