Transitioning a family business from one generation to another is a difficult undertaking that, at the best of times, creates a degree of uncertainty among the owners of the business, the managers and employees of the business and the family itself. The owners and operators of the business are bound have questions and concerns as the transition may affect their expectation for financial return on their investments in the family business and their job security, and the family will undoubtedly be concerned about the successor’s ability to maintain the both the day-to-day livelihood of the family and the harmony within the family.
Last month’s column raised issues associated with the owner’s reluctance to transition the family business to their children. This column raises issues relating to the next generation’s desire to take control of the family business.
- I’m Ready: While that may be true, have you ever had a conversation with your parents to satisfy any concerns they may in letting go of the business that they have spent their life building? At a minimum, you are going to have to address how they can retire comfortably and perhaps have input into decisions that change the direction and day-to-day operation of the business.
- Entitlement: Are you ‘ready’ because you are the oldest child in the family and you deserve the opportunity or have you been working in the business for an extended period of time and have the confidence of your parents and the respect of the employees?
- Values: Every family business is affected by the values of the family and owners of the business. Do you know what your family’s values are and are you prepared to continue to lead that business in a manner that is consistent with those values?
- Education and Outside Experience: Simply working in the business for an extended period of time may not be enough to become the next leader of the business. Families that have experienced success in transitioning their businesses to the next generation have often selected the next leader of the business based on their son’s/daughter’s education and business experiences outside of the family’s business. If there are some education and outside experience shortcomings in taking over the business, you may want to consider formulating a plan with your family to address this issue.
- Decision Making: Simply jumping into the position as the new president of the family business is not likely going to work for anyone. Having a business available for transition to you was the result of many good decisions being made by your parents. In the early stages, your parents are likely going to want to be involved in those decisions and your ideas to grow the business may clash with theirs. You may want to consider creating a board of directors or board of advisors to assist with the transition and the future operation of the business.
- Sibling Rights: If you have siblings, you and your family will need to address how your siblings continue to be involved with the family business. You may be able to take control of the business without needing to address the needs of your siblings today, but consider what that will look like on the passing of your parents when they still hold an ownership interest in the business that is then passed on to your brothers and sisters.
These are just a few of the issues to be addressed in any family enterprise succession plan and all of these issues need to be addressed by way of meaningful conversations with everyone that has a vested interest in the business.
If you are ready to have these discussions with your family, you may want to retain the services of a FAMILY ENTERPRISE ADVISOR™ to assist you and your family in formalizing a succession plan that everyone is prepared to adopt. FEA’s have the knowledge and training to address many of these issues and have a network of other professionals that can address issues that are not within their own professional discipline
For more information about FEA’s, or to find a FEA to work with your family, go to https://family-enterprise-xchange.com.
If you have a question or issue that you would like to read about in future columns, please feel free to email me at email@example.com.
Until next time.