 | Clemens H. "Clem" Ast
has spent the last 28 years working closely with owners, leaders, and families of client companies to build business legacies that will last to new generations. A family business owner, mentor, and coach, Clem focuses on strategic thinking, family council development, Board of Directors improvement, and executive leadership coaching. Clem is a member of the Family Firm Institute, and the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), and other local associations. He recently received a Certification in Family Business Advising from the Family Firm Institute. Clem can be reached by email at cast@LegasusGroup.com or by phone at 316.681.0444. |
Business
2004-10-01 14:55:00
Family businesses sold to chains?
ANSWER: As I'm sure you have read, the family business will undergo a massive "sale" in the next two decades--a sale to the next generation. It is estimated that approximately $15 trillion in assets will be transferred from one generation to the next in the coming twenty years. Most of this wealth will be in the form of the family business. Although this is an exciting opportunity for those who are next-generation heirs, it also offers an anxious amount of uncertainty.A sobering statistic regarding family business is that only one in three will survive to the next generation. But, there's no reason the future should repeat the past. Just as a company engages in strategic or product planning, there are steps we suggest you take to prepare for this inevitable transition. 1. Ask the following questions: "Is there a deep desire, and are we willing to do what it takes to transition to the next generation? Are there family members who have a passion for the business and are willing and able to lead?" If you and your brother truly want to leave a legacy and are willing to tackle some very difficult issues and decisions, there is a strong likelihood your business will progress to greater success. 2. Communicate! The family should get together for a day to discuss their dreams, aspirations, fears and challenges. Sounds simple, but it's difficult. You will hear -- "I'm nervous. Can you tell me what will happen?" The reply -- "We don't know what will happen." From experience, we can assure you that communication is usually the only thing between you and two-thirds of businesses that don't survive. So, do what you can to create a safe environment where members can say what they think. There is no family that does not have its own demilitarized zones where no one dares to tread. Rather than avoid issues that must be addressed, you should consider using an advisor with a background in family business development to guide your family safely through these zones. 3. Establish a framework for transition. This is not an estate plan, a will, or a charitable trust (although these are important). Rather, it's a series of processes and documents that describe: your interests and intents; guidelines and policies regarding family employment, compensation, promotion, liquidity, etc.; and a strategic plan for the business, including the involvement of non-family leadership. 4. Determine how future leadership will be developed (including family, non-family, and especially the successor). This is essentially a career development plan, but includes exposure to the board, mentors, and peer group involvement. We know a firm that has asked the next generation of sons, daughters and cousins to take a lead role in defining their development paths, family policies and governance roles. As they visit these issues in their family meetings, they are able to continue an open dialogue that focuses on process, not personalities. They balance their efforts with input from the company's leadership team and board of directors, which includes outside non-family directors. 5. Establish timeframes and accountability. Nothing is more discouraging than to hear the senior generation say "We'll discuss that later," or "I'll tell you when you're ready." However, it cannot just be left to Dad to initiate. The architecture must be developed to essentially force the owners, board, managers and family members to be accountable to the plan. There are an abundance of sad stories about leaders who died before they got around to discussing their successor, their financial and legal intentions, and their dreams for the business. As crazy as it seems, these stories are no different than the companies who had to sell, or ended up in court with opposing siblings. The best strategy? Develop the contingency plan ("if I die tomorrow") and the transition plan ("how and when I'll pass the baton").
