I grew up in a family business. My father began a small nursery which eventually grew into a successful and highly profitable business. However, he never had a business plan. I nagged him for years about it until he finally understood how important a succession plan would be for the business, the employees and our family. He died suddenly just a week after we met to discuss what would happen when he was ready to transfer the business. Unfortunately, none of the ideas we discussed had a chance to be implemented before he passed away. The negative impact of not having an effective Ownership Conversion Plan™ (OCP) resulted in high taxes for the business, family conflicts and a dynamic that remains contentious even to this day.
Sadly, my story is probably much like many other stories when it comes to family owned businesses. Many business owners assume that their heirs will take over the family business, but they don’t actually have a business will, otherwise known as a buy/sell agreement. The U.S. Census Bureau shows that around 20% of U.S. businesses are family owned. Of those businesses, only one-third will successfully transition from one generation to the next.
When you own a family business, there is much more than finances to consider. You must contemplate emotional ties, family roles in the business and securing the family legacy throughout future generations. Every business owner needs a proper plan in place. Having an OCP is even more critical among family members to ensure that the current owner’s legacy is realized while avoiding family members being pulled apart by a lack of knowing what is expected for the business.
Ask your attorney to help you put your OCP into place legally. The buy/sell agreement is one of the most important documents supporting and protecting your business assets and those who depend on them. Family members will not be left to wonder what to do in the case of an unexpected death or disability.
In addition to the other succession planning professionals on your OCP team, seek out a professional family business counselor. Their experience can prevent future problems and prescribe solutions for any present conflicts. Clear communication helps family members plan for the future they desire, allowing each person the ability to grow professionally according to their own respective goals.
Legacy begins from the bottom up and not from the top down. Business owners will have lasting success as they prepare for the ownership conversion with the future generation in mind. You can’t be the owner forever and your main focus is the company’s success, which needs to continue supporting clients, employees and the greater community long after your leadership ends.