How to Pass Down a Family Business – Expecting to inherit and run your family’s business exactly like Mom and Dad did? Each new generation of leadership has different skills and interests. Business contexts shift. Maybe you should step back and consider the CEO’s job description, the governance of the business and the evolving business context — or you might be setting yourself up to fail.
Sequel fallacy is a name that evokes Hollywood and its penchant for sequels. Ever since the 1910s, movie sequels have been a common cost-saving measure; they let studios reuse sets, costumes and props. Sequels are still big business in Hollywood. The audience has a sense of comfort and familiarity with the concept, often leading to successful box office numbers.
Family business sequels have similar traits: ownership structures, role descriptions and decision-making processes can be reused — right? What worked for the senior generation should work for you. But are you considering your co-owning siblings?
Your relationship can devolve into infighting, business losses and even lawsuits. Families can break up, reputations can be lost and the business could fail. Instead, involve other people with different interests, relationships and aspirations. Operate the business with a different ownership context and culture.
You may need to reinvent, revisit and/or refresh the firm’s ownership and leadership models. Here are five steps to take before making succession decisions:
- Articulate changing dynamics. Your family has grown, and the extended family has grown up with different experiences. Individuals have a wider set of interests, expectations and behaviors.
- Seek to understand the changing players and dynamics. In the meantime, don’t undercut your credibility with the rest of the company by neglecting your employees.
- Analyze changes from the last transition period in order to have a better context for what’s needed in the future.
- Have discussions with your family and the business’ owners to explore how these differences might affect the future.
Provide the next generation with a road map to eventually transition to their own children. In keeping with the movie analogy, think about the Marvel Cinematic Universe and how well it has fared in evolving characters, superhero talents and challenges. You can do the same with your family: Assume the role of director and create a future in which each family character can survive and thrive for generations to come. Celebrate and support one another to foster dedication and success.
Did you enjoy reading, How to Pass Down a Family Business?
Interested in learning more about this subject? Attend our upcoming estate planning webinars!
Have You Properly Protected Your Loved Ones? (FREE Estate Planning Workshop), Trustee and Power of Attorney Training School Webinar, Medi-Cal Webinar, and/or Probate Webinar. Get registered today for our estate planning webinars!
This website is not intended to be a source of solicitation or legal advice. General information is made available for educational purposes only. The information on this blog is not an invitation for an attorney-client relationship, and website should not be used to substitute for obtaining legal advice from a licensed professional attorney in your state. Please call us at (626) 403-2292 if you wish to schedule an appointment for a legal consultation.
For more information about The Hayes Law Firm, visit our Google My Business page.
Thanks for reading, How to Pass Down a Family Business!