Through its life-cycle, a Family Business will face many challenges. Some of them are inherent to any business, others are specifics to family business dynamics:
Estate administration and management after death
Attracting and retaining talent in the family business
Passing the torch
While dedicating time to grow a business is important, preparing for the inevitable *life after* is just as important. The planning of a successful succession should start as soon as possible and should address the following topics:
Valuating the business is recommended and is the initial step to establishing a plan; it is used for determining the value placed on the business in question.
Corporate governance continues to define solid management accountability to an organization. Policies and procedures may have little value to the business founder, but a potential buyer will want to acquire a company with solid operational policies. Formalizing the ‘unwritten’ rules in a family business brings the family business to a level that is more attractive to a buyer…even if the buyer is Family!
What drives today’s Generations X & Y is vastly different than what drove the Baby Boomer Generation to succeed. Understanding the difference between how the “children” are motivated, compared to the “parents”, may make the difference between passing on the business to a family member or having to sell to a 3rd party.
Transition & Family Dynamics
Transitioning a business to a family member differs greatly from selling to a 3rd party. Family dynamics often mean a less favorable deal for the seller in order to facilitate the acquisition by the family member (s). These dynamics will need to be assessed and evaluated, and then managed, and this process assists both parties in overcoming both emotional and financial obstacles during the transition process.
The main goal of a proactive family business succession plan is to ensure maximum valuation while retaining family integration and family wealth. Whether it is tax planning, estate planning, or corporate governance, a plan with both the seller and buyer must be established (as with any 3rd party transaction) that guides all parties to ensure a fruitful transition.
If you want to know more about family businesses, how to manage tangible such as tax and estate planning and the not so tangible family dynamics, please contact us or subscribe to our Newsletter.