Separating business needs from emotional responses. That’s the challenge facing family business owners – and one that is particularly evident around the issue of succession planning.
Succession planning can provoke awkward conversations, tension and disagreements among family members and topic avoidance is only an immediate band aid. In extreme situations, families have been torn apart from not properly addressing and planning for the future.
Getting a succession plan right helps preserve a company’s net worth. Taking an objective approach means removing emotion from considerations such as whether or not your child really wants the business. Your business is your passion. However, this doesn’t necessarily mean that your children will share this same interest or give it the same high level of attention. Many entrepreneurs make the mistake of assuming that corporate shares will go to their children, but sometimes, the children don’t want them. Don’t bequeath shares without first having a conversation. Be proactive. Have a frank discussion with your children and give them the opportunity to assess the impact shares would have on their financial plan.
Another consideration is whether or not your child is the right owner for the company. An interest in becoming a shareholder does not automatically translate into a sound business decision. The decision becomes more difficult if there are multiple children with various levels of skill and experience. A proper succession plan can allow you to share your estate equally with all your children while awarding operating rights only to those who are best suited.
Involving independent advisors at various stages of the planning process can be useful in facilitating difficult discussions. Lawyers, accountants and chartered business valuators provide more than professional service and advice on succession planning. They can provide the intangible value of acting as an intermediary to preserve a treasured family relationship.