Helping families navigate the choppy waters of succession is Marty Carter's business. Trained as a social worker, Carter is also a partner with Charles D. Haines Inc., a financial adviser in Birmingham, Ala., and a founding member of the Family Business Alliance in Minneapolis.
Q: What are the most common mistakes family businesses make when planning for a change of ownership? A:
Q: What are the most common mistakes family businesses make when planning for a change of ownership?
A:There are many. Often there's no family dialogue about the future, such as whether to sell, diversify, or expand the business. There may be little discussion of how the next generation will be involved in both ownership and management.
When considering heirs for management positions, entrepreneurs often don't look closely at their heirs' skills, experience, and interests. They also may have trouble dealing with sibling rivalry. And many owners fail to provide mentors for the succeeding generation.
Q: What decisions need to be made first? A:
Q: What decisions need to be made first?
A:First, owners have to establish which heirs are interested. Then they need to determine if those people have the ability to run the business. They need to start planning as early as possible.
Q: What are common stumbling blocks? A:
Q: What are common stumbling blocks?
A:Occasionally, someone gets cold feet. But having ongoing, probing conversations can help identify hidden fears and agendas that can sabotage the process: Dad says he wants to step down, but will he? Or the father who says to his son, "Of course you can pick any career that you want, but I thought...." By periodically working with the family, one can help them set realistic expectations and see their progress. Then they can avoid the type of misunderstandings that could cause someone to back out.
Q: How can owners make sure family members who aren't directly involved in the business are treated fairly? A:
Q: How can owners make sure family members who aren't directly involved in the business are treated fairly?
A:If some heirs want to be owners but not managers, it's important to find out if they want an exit strategy. Do they want to be bought out, and when? If so, owners need to make sure they are justly compensated.
Q: How can outside consultants help? A:
Q: How can outside consultants help?
A:First, if some family members see the business as an entitlement, rather than a responsibility, an outside team is essential for resolution.
But more generally, consultants encourage conversations between generations and elicit ideas and opinions that otherwise might not come out. The younger generation may be reluctant to ask sensitive questions, or owners may worry that their children won't want to follow in their footsteps. Outside advisers can also use assessment tools to gauge the talents and skills of the next generation.
By Gay Jervey