Family businesses are part of the rich heritage of our nation and are key to a positive economy. These companies are the backbone of our country and have the ability to absorb market swings much better than large companies, which is a good stabilizer.
The ultimate goal when working with a family business is to maintain a healthy and successful company. However, family dynamics can provide unique challenges in day-to-day operations as well as long-term planning and succession planning. Much like a will, no one likes to think about such plans but they are vital to a company’s longevity. Basically, a business succession/transition document should be part of an ongoing structured plan that is regularly evaluated.
With a family business, there is a lot at stake. All owners should regularly reassess goals and succession plans to make sure they remain on track and align with long term business strategies. This process is key to providing consistency with earnings and profitability.
There are many variables to consider in planning any transition – ownership transfer, wealth management, family relationships, viability of the enterprise, continuity of operations and leadership succession. Because of that, communication among family members is vital to successfully managing succession. It’s important to not assume, for instance, that a son or daughter is interested in taking over the business. They may not want to. If a business owner sets up a plan based on such assumptions, it could negatively impact the long-term stability of the company.
Many family owned businesses are actually looking to transition ownership in their planning but not management. When this is the case, additional issues arise as the company works to minimize potential conflicts. In these scenarios, it might be beneficial to engage a counselor to address internal conflicts as younger leaders begin to assert themselves. This action step often makes for a smoother transition and reduces dysfunction that can negatively impact the business. Counselors can moderate discussions among the family to ensure that all issues are brought forward and openly discussed.
In any family business, the ultimate goal is to provide a profitable source of income and security. An effective succession plan that is assessed and updated over time to fit the needs and wants of a family is the key to a healthy transition and a successful future.