Tuesday, March 8, 2016
Many family business owners hope that their children will one day take over the business. They dream of working side by side with the next generation. They often assume that the transition in leadership will happen naturally over time. However, hoping and dreaming about a future for the business, and assuming that day will come, won’t make it so. As baby boomers rapidly approach retirement, succession planning can no longer be kicked down the road to tackle another day. It is an all too common refrain to find business families that are not making concerted plans to transfer the family firm to the next generation. Beyond just an estate plan to transfer legal title to the business, building a business family legacy requires successfully transitioning from one generation to the next, and that transition takes hard work.
Business families frequently struggle – or even fail – when they do not address and actually talk about the longevity, the vision, and perpetuation of the business and commit those plans to writing. Talking with the next generations about the future, talking about a longer time horizon than Wall Street allows for publicly traded companies, and discussing adequate preparation and development of the next generation of leadership opportunities to both strengthen family relationships and strengthen the future leadership of the business.
Business families succeed when they are able to discuss the difficult issues, plan for the future, and work together as a cohesive unit in a unified structure. When the ownership is beyond the founder/entrepreneur and consists of a sibling group or a cousin consortium, there is even greater opportunity for misaligned expectations, misunderstanding, and conflict. The dialogue required for this planning is not always comfortable or easy. The discussions need to address, among other things, business goals, business management, ownership, and shareholder expectations.
Even with the best transition plan in place, however, the plan must be executed. A defined transition plan should be flexible enough to deal with both current issues and future issues, and yet detailed enough to provide meaningful guidance for both generations. Both generations need to execute the plan with a focus on the present and striving toward a vision of the future.
Creating a collaborative environment between generations can strengthen relationships and allow the family to capitalize on their financial, human, social, and intellectual capital. Having a plan in place and the ability to discuss and implement the plan with the family will help you in setting the foundation for building a multi-generational family legacy.
Contact SKM Associates