Words of Wilson features a rotating panel of consultants from Bruce Wilson & Company, a landscape consulting firm.
There are more than just financial issues to consider when transitioning a family business. Beyond the mechanics of how to transfer ownership or sell the business to the next generation, the real challenge for a parent is less about the logic than the emotion. Owners tend to kick the can down the road and assume they can work it out when the time comes. This can be very frustrating and unfair to the next generation as well as to the business itself.
The best successions are a result of good planning, open communication among all parties and understanding everyone’s expectations. Many business owners assume that one of their children will take over the business in the future. Before getting emotionally invested in this outcome, make sure that this is their dream as well.
Engage all stakeholders.
This step is critical. These include children working in the business (regardless of role), children not in the business and even their spouses. Grandchildren and other close relatives may also be considered depending on their age and career goals.
As one of the primary stakeholders, you will want to address all concerns, regardless of whether or not you agree with them. Be prepared to deal with issues including equal versus fair, egos, money, family dynamics and timing, among others.
Many owners have the bulk of their wealth tied up in the business and everyone will have a different view on what they think is fair. You will need to reconcile how the owner gets paid for the business so that they can afford retirement, how wealth is transferred from the company to their estate to be shared by all the children, and how to not hamstring the next generation by removing all of the cash from the business so it can keep going strong.
Be flexible and define roles.
The transition plan should include a timeline with room for flexibility. Many owners have been known to agree to a deadline only to find out they are not ready to let go when the time comes. While the final decision on timing comes down to the current owner, they must recognize the impact a delay has on the business and the family.
Buyers must realize they can’t force an unprepared seller; buyers get to decide if it is worth the wait. It is best to define clear roles and responsibilities for both generations. These definitions should evolve over time, giving increased responsibility and authority to the next generation. It helps prepare them for leadership by giving them training, tools and skills needed to be successful, and it allows the exit generation an opportunity to build trust in the new team while gradually reducing their daily responsibilities.
Throughout the process, communication is critical between generations and stakeholders. It can also be helpful to find a trusted friend or colleague to review ideas or concerns. Several of my peer groups have multiple family businesses in the same group going through the transition simultaneously. A very healthy dialog happens between the owners in sharing their challenges of the transition and of the next generation sharing their frustrations transitioning into leadership.
Transition meetings scheduled away from the office with an outside facilitator or continuity consultant can be a great way to minimize frustrations by identifying and resolving conflicts and issues, tracking progress and adjusting the plan as necessary.
Family-owned businesses are the backbone of the landscape industry. Transitioning from one generation to the next presents even more challenges than a typical ownership change. Following these guidelines won’t eliminate all problems and hurt feelings, but it should help minimize them.