Building a family business is challenging – takes more than blood, sweat and tears to create a successful company. The family business becomes part of your soul. The last thing you want to see is a divide between the people you love OR miss an opportunity because of family conflict.
According to the Colorado–State of the Owner Readiness Report, 95% of business owners agreed that having a transition strategy is important. However, 68% of those owners indicated they’ve spent minimal time and attention on their exit plan.
When you’re ready for the next chapter in life, having a thorough succession plan is critical for a successful transition.
Types of Conflict to Expect During a Transition
Transitioning a family business to the next generation is a delicate process. There are different types of conflicts family businesses may experience during a transition.
- Conflicts between children. This can occur when one child is heavily involved in the family business and helping it grow, and the other child is not. We see issues arise when determining who deserves what when the business is passed on to the next generation.
- Assumptions and expectations are not met. When important conversations are postponed or avoided altogether, family members are likely to have unrealistic expectations of what is supposed to happen.
- Outside variables, such as illness, divorce, etc. These types of conflict might not seem directly related to the family business but often have a great impact on what is happening during a transition.
How to Minimize Family Conflict
At Private Wealth, we understand that both family and business are very personal and sensitive situations. We’ve often seen old wounds, unrelated to the success in general, create divides. Here are three important ways to minimize conflict during a family business transition.
- Start planning early. If you’re ready to pass the baton to the next generation, you need to begin developing your succession plan two to five years before planning to step away. You can begin the presale planning process which will address items like proactive tax/estate strategies, company due diligence, how to bolster management structure, and illustration of ownership transfers. Presale planning can also help you navigate areas that are sensitive, giving you time to figure out how you want to address them.
- Don’t delay important conversations. When a business owner has unique family dynamics, they could feel hesitancy in discussing transition plans. Every business owner has an exit–either planned or unplanned–so having these conversations is inevitable. Having a trusted partner help you navigate them could relieve anxieties.
- Build the right team. Transitioning a family business is a complicated process. You need experienced, strategic partners to guide you through the process. In some cases, it takes time to put the right team together. Collaboration of your team is critical.
How Private Wealth Can Help
Our advisors have successfully navigated every aspect of beginning, maintaining, and transitioning businesses.
Private Wealth advisors:
- Facilitate family meetings. We can help bring together your family and a trusted team to mediate conversations and provide a neutral environment to tackle complex conversations.
- We are an outsourced family office. Our family office environment provides business owners with a deep bench of experience and specializations. We connect our clients to a network of professionals who can address all types of issues and know how to manage a family business transition.
- Build a business transition plan. This is critical to helping owners set and achieve goals within their transition path, have an accountability partner, and foresee obstacles and opportunities along the way.
Because of the complex family dynamics involved in such a transition, our clients often don’t know where to start when planning a succession. We’ve developed a thorough process to evaluate and guide you to the best path forward.
- Corporate Goal Setting. We clarify your goals and priorities to build a unique strategy for the future of your family and business.
- Business Continuity Instructions. We put a plan in place for the unexpected and build confidence that your hard work and legacy will continue on your terms.
- Business Valuation Review. Our advisors help you understand exactly where your business stands and provide you with information to direct your overall wealth plan and future goals.
- Review of Transition Alternatives. We’ll explore every angle and option as you form and review exit strategies.
- Proactive Tax Strategy Review. Our goal is to help you keep more of your hard-earned dollars with a tax-specific business succession plan.
- Leases, Land and Real Estate. We want you to understand exactly how your tangible assets will work through your exit transition.
With our thorough process and diverse community of professionals, our team can help you address any foreseen or unknown conflicts.
Preserving and growing your family legacy starts with granular planning. We navigate the nuances of family dynamics with grace and respect. Learn more how Private Wealth can help you, schedule a strategy session.