Most Common Issues: Succession Planning for the Family Business

25 Jan Most Common Issues: Succession Planning for the Family Business

Succession planning is complicated in the best of cases. Succession planning in the family business could lead to a disaster of epic proportions. The reasons for failure are endless: from emotional triggers to secrecy, from impossible expectations to a lack of respect. Families are complicated, and your family’s business is tricky.

Some of the most common issues owner-managers identify in succession planning include:

Control-oriented people. Owner-managers are often control-oriented, and so are parents. Control often involves money and works in subtle ways. Also control-oriented people are often told (or simply hear) what they want to hear.

Communication problems. Communication within families is not as reliable as communication between strangers. Parents and children need to be open to listening to each other. Parents should avoid using money to influence their children, and children should be respectful of the parents’ advice.

Sibling rivalry. One jealous sibling can destroy a succession plan. The decision you make with the business can affect how other family assets are considered, including houses and cottages. Make sure to build a succession plan that takes into account your entire estate.

Playing favourites. Whoever succeeds you should be truly qualified. That person will need the support and loyalty of your management team, your employees, your suppliers and your customers. If your son or daughter is not sufficiently skilled or respected, this family dream could quickly become a nightmare.

Familiarity breeds discontent. The opposite is also true: It’s important to recognize your family’s abilities. Some owner-managers can’t see the abilities of their spouse, siblings or children. But they may be more capable than you! Keep your eyes and ears open to their strengths – and use them.

Sharing the details. When your family doesn’t know the plan, resentment is the result – especially if you are not around to explain. Sharing the plan with your family is as important as making the plan. It’s a bonus if you can get their buy-in.

Family pressure. Some children aren’t interested in the family business but feel they should be. Maybe your spouse or another family member is pressuring them to participate. Don’t permit that pressure. In the long run, your business will be more successful if the new owners are committed and enthusiastic.

Money pressure. A family-run business needs to support the family. But if the retiring owner-manager and the younger generation are both dependent on the business, it may create too much financial pressure. You’ll need to ensure the business is strong enough to withstand the pressure.

Making a choice. In the end, keeping the business intact and the family in charge is not always the best course of action. Sometimes the family is better served by selling the business to a third party and using the money to help family members.

The best way to avoid disaster is to make a succession plan. The process clarifies everyone’s wishes, as well as the priorities and needs of the business, and leads to a solid plan for the future.

To learn more about transitioning your business, contact us.

Joel Rose

With over 35 years of experience, Joel Rose helps families – and their businesses – to prepare for the future. He offers guidance and support to help his clients create estate plans and succession plans that meet the needs of the whole family. Through his extensive professional and personal experience, Joel is known for his compassion and his ability to find a creative solution to meet each family’s needs.