The most consuming questions are typically regarding logistics: How will the ownership look? Who will be in control? How do you structure it? How do you minimize taxes during transition?
The most overlooked question, however, is the most important question. And it has nothing to do with logistics….
We sat down with a family last year to work on the transition plan for their family business and assets. Dad and Mom were in their late seventies, and the kids were in their late forties. Everything that had been done to this point was “off the cuff” and agreed upon with a verbal handshake. Dad was still taking income from the business even though he was no longer working. Two of the brothers were trying to take the business to the next level, but were hurting for cash flow. The third brother was not part of the business, but was actively involved in the family ranch. Emotions that had been stewing for years were running deep in that meeting. Years of things not said and not done had piled up. The old saying—there’s a wreck, and we’re in it—was ringing true.
Yet honestly, this wasn’t our first time in that position and it hasn’t been, nor will it be our last. We see this same story play out in family businesses repeatedly. The problem is not the logistics. The problem is value.
In most businesses, everything is assessed with a value. The business itself has a value. The efforts of the businesses’ people are valued. The people themselves are valued. The products or services are valued. Ideas are valued. The list goes on.
When was the last time you valued the family business? When was the last time you put a value on the family members part of that family business? What plan of action is there to reward any and all value created in the business?
Most family businesses don’t put a value on all of these things, if any. Now, there are a lot of reasons this occurs, but basically it is because it’s family. Over time everyone falls into their niche, time moves on, and key conversations never take place.
The problem is that this creates a false reality. If there is no “stated” value, the only alternative is everyone developing their own assumption.
Have you ever gone to work one day and come up with a great plan for your family to spend time together over the weekend only to come home to your spouse blowing up those plans because he/she had their own plans for weeks and forgot to tell you?
Yep! That is where assumptions get us. In the case of a family business, it’s often on a much larger scale.
At the end of the day, everyone has developed different goals, expectations, visions, and beliefs. The foundation of the business itself is at risk. How can you possibly plan the logistics of a successful succession plan on this?
It may be family, but business is still business. “Off the cuff conversations” and “verbal handshakes” are a recipe for disaster. Ask yourself: What would I be doing if this were not family? How would I be doing things differently? What would the transition look like?
These differences are the keys to success and it starts with stating the value.
Everyone wants good Christmases and Thanksgivings. We can’t promise that you will have them, but we can promise that you will have a much better chance if you remember to treat your business like a business and address “value.”