Wealth and succession planning is important for everyone in a family business but even more so is family stability and harmony.
The challenge in addressing succession is to understand the emotional changes that are taking place with the founders and their heirs and trying to keep the family stable and communicating well during the process and after.
It’s an emotional business
Having worked with many family businesses over the last 20 years I see the benefit of an experienced independent professional to assist in planning, coordinating and working with the family in putting a plan in place for succession and help steer the family through the process.
All families are different and they tend to believe that their problems are unique to their family only. In my experience working one to one with family businesses there is a similar pattern of emotions in almost all families with the uncertainty in addressing succession.
When it comes to distribution of assets family heirs may associate assets with affection, which may lead some family members to feel not as loved or not appreciated if they receive less than another sibling. It may however, be necessary to distribute things differently for either tax or control purposes or simply because one heir has worked in the business all their lives and thus contributed hugely to the building of the business and another worked outside the family business. The communication around this has to be clear, sensitive and planned.
Often founders find it difficult to let go as their business has been a defining part of their identity and may fear the future and the loss of a role. Heirs on the other hand may feel unprepared and be fearful of destroying an established business. Heirs may feel mistreated when they don’t get the top job or status that they feel they need. This fear of rift has meant the many founders postponing the decision until much later to address succession and sometimes too late when tax planning has little value and management are unprepared for the change.
Families can address all of these feelings in the cool light of day when things are stable in the business by working with a professional.
It is only natural that during the process issues will arise and these issues need to be talked through so that everyone has a full understanding of individual concerns. It is important to everyone to be able to feel comfortable to be able to air these concerns in a safe environment. It is wiser to bring these issues out into the open, rather than have them bubbling underneath the surface and festering. It also means the parents are dealing with the issues head on when they are alive rather than leaving a trail of destruction when they die with their wishes only been outlined in their will.
Good and regular communication throughout the process is key to getting this right with the help of a professional.
Successful succession starts planning early
My advice to families is to start succession planning early and talk to heirs, it is believed that the age of 27 is frequently an appropriate age for successors to be involved in discussions about inheritance. Clearly age is subjective. Many landed families start the conversation early whilst others leave it to later as they don’t wish to start conversations too early and cause a rift. The onus is on the founder to start these conversations as it is very difficult for heirs to bring forward these conversations.
If the business doesn’t transition smoothly from one generation to the next, there is an impact beyond that suffered by the heirs (who may be unprepared) with risks to jobs in the business and the local economy.
My advice is talk to an independent professional in confidence and put a plan in place now to ensure a careful measured transition.