Family Business Transition

November 08, 2016

Planning for Transition, Sale or Exit? Don’t Alienate Your Kids!

By Jeff Noble

My business expertise is both simple and complex. I work with private business owners – many of them are business families - to help them successfully navigate the challenges of transition from one generation to another, or to third parties. There are lots of exit and transition options, and every business owner will exit one day. My goal is to encourage business owners to proactively plan the transition so that they and their key stakeholders can control the key factors required for a successful business transition.

As you may well imagine, almost every situation that I encounter includes parents and children. Now you might call me crazy for getting in the middle of this dynamic, but I can honestly say it is extremely interesting and fulfilling to help a family successfully transition in this complex mix of emotion, expectation and anticipation.

While I could spend days and possibly weeks talking about the challenges that my colleagues and I have seen, in this article I want to focus on one of the best lessons that we have learned advising hundreds of families over 20 years.

This lesson is as follows: don’t alienate your children.

This happens much more often than you think. Overtly, I see it in at least 20% of the families I deal with. In less obvious ways, it is about 80%. Here are some of my observations of how that happens:

• Overtly:

  • Making decisions for the children – because as parents we know best
  • Protecting’ them from information they need
  • Not engaging children in the transition process
  • Deciding for them and between them

• Covertly:

  • Enabling historic sibling rivalry
  • Not recognizing parent / child rivalry—especially between father and sons and mothers and daughters-in-law
  • Silence
  • Playing out the family emotional dynamics in the transition process
  • Unsigned agreements

Here is a good example of how I have recently seen these dynamics play out:

A business family found themselves in what was to them uncharted territory. Working with a team of their trusted professional advisors, Mom and Dad spent several months’ time, energy and resources, creating what they felt to be a fair and equitable succession plan for the transfer of their business. A meeting was convened to present the already executed plan to the adult children, who felt alienated as a result. In fact, they were stunned. This caused immense and immediate division as the children walked out of the meeting, leaving their parents, speechless, behind. At present, we are encouraging them to engage in positive communication to come back together as a family.

Parents, with the very best of intentions, all too often create a rift between themselves and their children. How can this be? As every parent knows, our role is to protect, nourish, encourage and develop our children so that they will become independent and maximize their potential. And yet, as the senior generation contemplates succession, business transition, and ultimately their estate, this role of protector and provider serves to alienate the children. This is destructive to business families.

A key factor for a successful transition of a business is good governance structure including open, positive communication and transparent decision making. There are so many dynamics at work: family and personal, the business and management, and the ownership. These represent 3 types of capital – social, intellectual and physical. All of these need to be transitioned thoughtfully and deliberately, always keeping in mind how to balance any competing interests. We encourage you to do this together as a family. This will not just keep feelings of alienation away, it will bring your family closer and working toward a common vision.

To learn more, contact 1 800 598 6400

About BDO

One of the nation’s leading accounting firms, BDO Canada provides assurance, accounting, tax, and advisory services. As a member of the BDO international network, which spans more than 150 countries and 1,400 offices, BDO provides seamless and consistent cross-border services to clients with international needs.

About BDO’s Business Transition Practice:

BDO’s Business Transition professionals work with privately held and family-owned businesses, helping clients plan for the future. Our services include improving company governance processes, ensuring a fair entrance and exit process for shareholders, and developing a wealth plan that protects, preserves and grows existing assets. Throughout the entire process, we stay attuned to our clients’ needs and respond quickly to issues and concerns as they arise.

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