The Family Business, Part 2

When considering a succession plan for your family business, start with one of the most basic questions: who should succeed to your business in the event of your passing? A basic question, to be sure, but before you start planning your business plan wrap up, you need to determine whether it should descend to your family or not?

If you are like most entrepeneurs, you'll typically want your family to share in the successes of your business, but you may need to decide whether they should take on your business, or whether you should just pass to them the fruits of your business. When thinking about this, ask yourself these questions:


1. Does your family have the desire? First, ask yourself: does your family even want to continue your business? I've never done a formal survey, but anecdotally, I'd estimate that no more than half of the entrepeneurs I represent has families who even desire to take over the business. Often, the children have watched their parents sacrifice their private lives and time with family to build a successful business, and the children determine that they don't want to live their lives that way. I also suspect that for many of these children, who have enjoyed the financial fruits of their parents' labor, they subconsciously disconnect the labor necessary obtain those benefits. What do I mean? I've seen numerous children of successful entrepeneurs decide to work in lower-paying jobs--becoming teachers, social workers, and other idealistic professions. Some of these, I believe, decide to follow a calling such as this because in the back of their minds they know that they have their parents' financial resources to rely on.

If you're like most of my entrepeneur clients, your children have enjoyed the benefits of you owning the business: but do they want to own the business?


2. Does your family have the ability? Even if your family members do desire to take over the business, ask yourself this brutally honest question: do they have the ability to successfully continue (and even expand) the business you worked hard to create? Anecdotally, again, I've found that in more than half the cases, if a family member actually desires to continue the family business, that family member probably also has the ability. You've ingrained into him or her the work ethic necessary, and your family hopefully will share many of your same values that helped make your business a success. However, your family's ability is not a given. Just because you have a brilliant medical practice does not mean that your child can share that gift you have. Make an honest appraisal of your family members and your business. Does your business require mainly hard work and a certain ethic? If so, your child's desire to continue the business may see him through. Does it also contain certain talents or gifts that most people don't possess? Consider it more closely, then.



3. What do you do when there are multiple family members? I've been writing this article almost as if you only have one child, but the average family, of course, will have two or three children. This could bring multiple complications--all of which can be overcome with planning, but which need to be considered. I've seen all of the following issues:

--A brother and sister both want to run the family business, but don't get along.

--There are three brothers, two already in the family business, but one who is much younger and a minor.

--One child has always been in the business, and the other has never had anything to do with it, and the parent is trying to figure up how to divide his estate fairly between both of them.

None of the issues I have mentioned should keep you from making a succession plan with your family business. To the contrary, they are matters to be considered, and, with good planning from an attorney, an accountant, and perhaps even an investment advisor, they can all be taken into consideration when creating a successful plan regarding your business.