One of the most common obstacles that family businesses face is multi-generational succession planning.
Navigating ownership succession, while taking into account sibling differences can present an array of challenges. What happens when the heirs of the business have different needs, talents, goals and levels of involvement in the family’s business? These differences and communication barriers can create major obstacles to a smooth transition in leadership that can lead to the ultimate destruction of the company.
It may seem like oversimplification, but communication really is paramount to successful succession planning, and it needs to begin when the founders are still in control. This paves the way for properly communicating the founder’s wishes and plans, and will also give heirs the opportunity to weigh in, express their views, concerns or excitement.
An impartial, non-family third-party can also help create solution for your clients’ families. This can address a situation where one sibling genuinely cares about the business, while the others may not.
Being a part of a family-owned business with both family and non-family in partnership positions can create a unique dynamic. Privately-owned family businesses account for 64 percent of the US GDP, yet only approximately 40 percent of them have a clear succession plan in place. Unfortunately, a large portion of those plans will result in unsuccessful transitions.
Why are we facing such daunting statistics? Every family wants to create a legacy for their children in the future, but often are not taking the critical steps of addressing it in the present.
Three scenarios commonly face a family business once the founder gives up control: the business will continue to generate healthy profits; the heirs take over, leading the business to new levels of growth; or the family business will ultimately succumb to the many challenges facing families during a leadership transition and will be run into the ground.
Article published by WealthManagement.com June 27 2018
Written by Ivan Hernandez