It’s a storyline played out in best-selling books, movies and TV dramas: the successful family that’s torn apart after the death of the matriarch or patriarch and transition of the business and other assets. This isn’t the stuff of fiction. A succession plan addressing how to take care of your family business—and your relatives who are part of it—is key to a successful, perhaps drama-free, transition.
Why business succession planning is important
Transitioning your family business requires time, attention, empathy and communication as its effect on family members and on the business itself are vast. A succession plan is important because:
- It ensures that your business will survive your death (or a major illness). If the business is the primary source of income supporting your family, a thoughtful, detailed succession plan reflects your family’s values and supports its goals, identifies future leadership, and addresses potential issues before they arise.
- It can help ensure family members are taken care of emotionally and financially.
- It will also address ways that family members outside your business can still receive income, whether from the business itself or through other assets or trusts.
Where to start
If you haven’t put together a succession plan, it’s never too late to start. Have thoughtful conversations with your children or other next-generation stakeholders in your business. Hopefully, you’ve had conversations with them about finances, charitable giving, and generally how they feel about money. What are their expectations? What are yours? What values of yours have made the business successful and have you shared them with other key players? If you have a significant amount of money you want to pass on to the next generation, that should be part of your plan as well as any contributions to charity.
No two family businesses are the same, so a succession plan designed for the unique needs of your family and your business is best. An independent financial advisor or business consultant who understands your business and your goals can be an impartial third party to help you pull together a plan that works for everyone. They can also sit down with you and other family members, inside and outside your business, to create a plan and help facilitate communications. They should also be willing to work as a team with your other consultants including lawyers, CPAs or business consultants.
Open, honest communication between family members, even if it’s difficult, means that everyone—family members inside and outside your business as well as your employees— knows what to expect during a leadership transition.
You put a lot of time and energy in to building your company. Don’t jeopardize your hard work by not having a plan. The payoff is well worth it: a less drama-filled story with a happy ending.
Have questions? We can talk you through the next steps. Contact us today.