Business Transitions – Family Succession

The decision to transition the business within the family can be the best or the worst experience in the lives of all involved. Those that plan the transition with a long lead-time, attention to training of the next generation in technical and management skills, close attention to family dynamics and conflict resolution, clear communications and the use of skilled professional advisors have a good chance of making a family succession plan work.

Unfortunately, most family business owners leave the process until it is too late, base decisions on emotions, do not communicate, and let family conflicts influence decisions. These cases do not end in harmony and family cohesion.
What family members do not understand is that for a transition within a family to be successful, the owners (typically Mom and Dad) have to make decisions in their own best interests as well as in the interest of leaving the business in a strong position moving forward.

Everyone has to understand that fair treatment of family members is not the same as equal treatment. This is a concept many children and siblings refuse to accept without professional intervention. Furthermore, entitlement is the most negative and damaging influence in a successful succession plan.

The following are points in no particular order that every family based business owner should put into play to make their succession plan work.

1. Establish and stick to a clear timeline for the transition. Ideally, start the process at least 10 years prior to the chosen time. If not feasible, give yourself a five year window to get it right.
2. Determine what your goals are for yourself, the business, and family members.
3. Determine the weaknesses in your succession plan and put a plan in place to address them. For example, the skillset of the next generation, key relationships, supply chains, corporate structure, financing, debt, tax structures etc.
4. Clearly define your post-transaction role (if any) – get buy-in from successors before closing.
5. Communicate your intention with the family members and key management of the business.
6. Meet regularly with the family and have open communications.
7. Retain a succession planning expert that understands family dynamics and conflict resolution in a family context. Have the professional facilitate family meetings to communicate plans and goals and work towards buy-in.
8. Engage professional advisors such as financial, legal, tax, banking, and insurance at the appropriate point of the process.
9. Establish the value of the business

If you have any questions or would like to have a discussion of where you and your company are in terms of readiness for a business transition, please contact us. Details are below.