Family transitions may seem like one of the easier types of transitions, but they often come with their own challenges. It is easy to muddy the waters between professional and personal, especially when it comes to a family business. At the end of the day, if the people you are in business with are the same ones you are sitting down to holiday dinners with, keeping the lines of communication open and positive are an absolute must.
The first challenge in selling a family business is whether the children (or other family members) want to run the family business at all. Some owners may be planning their future under the assumption that their kids want to take over, or they may be planning based on a long-ago conversation. Interests and life circumstances can change even in a short period of time, so making sure everyone is on the same page on a regular basis regarding the fate of the business is important.
During any conversation regarding a family transition, it is also helpful to bring up the business values themselves and how each involved party views them. One family member may be interested in earning the most money possible through a sale of the business, while another may be more focused on the legacy of the business in the community. These differing viewpoints can lead to conflict if they aren’t discussed early on in the succession planning process.
Once a family business is on deck to sell and everyone is in agreement, it is important to consider how assets will be divided amongst everyone. For example; if two siblings are co-owners of a business, and one has two children and the other has one child – they could distribute the assets equally amongst the children (one-third for each child), or distribute the assets equally among the owners, then their children (half goes to one set of kids, the other half to the single child). Not talking about how this is to be done beforehand can lead to a sticky and uncomfortable situation.
The next key step is to make sure that the new owner, whoever it might be, is prepared to run the family business. Sometimes the individual taking over has been involved in the business for years (perhaps their whole life) so they may not need as much training or certification to take over. If this isn’t the case, the new owner may need some training that could be lengthy if it is going to preserve the longevity and success of the business. This could range from a period of job shadowing and mentorship, to taking courses and getting certifications, depending on the individual, the business, and the industry. The sooner the preparation period starts, the smoother the transition will go.
All of the conversations involved in any transition will be deeply emotional for the business owner. Selling their business — whether to family or a third party — means giving up a large part of their life and even identity. Older business owners may also be facing conversations about aging, illness, and death with their children as they transition to this different phase of their lives.
Conflicts may also arise during discussions about how to run the business in the future. Business-related disagreements have the potential to spill over into personal and family relationships. It’s important to remember that these are your family members, and you still have to spend time with them — coming up with a way to communicate openly and honestly about the business will help save those relationships.
Creating a succession plan for a family transition adds some extra steps to the process, but those steps are well worth it for the health of the business and the family. Keeping a strong line of open communication will not only benefit the business, but also the family.