Family Business Transition: The First Five Questions
by Chuck Meek
Of all the literature and intellectual capital out there
treating family business transition planning, there may be none
simpler than this: FOB | BOF
The Family Owned Business and the Business Owning Family are
opposite sides of the same coin: the business is certainly affected
by family ownership, and the family is most definitely affected by
owning the business. When planning for what comes next, to
concentrate on one without the context of the other yields an
inefficient transition at best, but at worst leads to the
extinction of both. That is probably why we still struggle with
balancing family and business, especially across generations, even
after millennia of experience all over the world.
Change is Change No Matter the Setting - and it's always
Family businesses are more likely to survive rough patches and
tough times when cruising along under stable ownership and
leadership - just like commercial jets at altitude regularly fly
through violently turbulent air but come out the other side
unscathed. Think about that. Have you ever wondered why the vast
majority of commercial airplane crashes occur within a few miles of
airports? It's because flight is inherently a bit less stable
during transition periods when the ailerons and flaps are in
motion- i.e., takeoffs and landings - than at altitude. And it is a
lot more difficult to survive unpredictable forces like wind shear
at 1,000 feet than at 30,000 feet; in both cases you lose 1,000
feet of altitude.
Recognize that transitioning ownership of family businesses has
always been a difficult event; the roadsides and ditches of history
are littered with dried husks of once thriving commerce - and too
often of once thriving families who owned them. Emotions run high
and complicate the process, frequently to the point of losing sight
of the real objective.
Simplify, Simplify, Simplify
So what do you do when faced with complexity? Simplify. Reduce
both sides of the Family|Business equation to the lowest common
denominator. Start with these 5 questions:
1. Has your family met to explore transition options?
For that matter, does your family meet to discuss anything? It's
not uncommon for the controlling generation to act like autocrats
or (hopefully, benevolent) dictators, and younger generations feel
powerless and voiceless in their company. Family discussions are
difficult for many, but make an effort to become more comfortable
with them. Eventually you will be able to discuss the pros and cons
of several possible alternatives: transfer to the next generation,
sale to a private equity group or to a strategic buyer, sale to
management, a full or partial ESOP, among others. These may seem
like questions of 'What' and 'How', but at some point you will come
to an understanding of 'Why'. And you will then have achieved a
2. Have you agreed on where you want to be in 3 years?
Shifting focus on 'where we're going to be' rather than 'what
we're going to do' draws attention toward multiple visions of what
could be and away from a recipe of 'correct steps'.
3. Are you aware of the common mistakes families make in
Regardless of the path you choose, you are not the first to
travel it. Countless other families have, with varying degrees of
ease or difficulty, reached the other side. Their collective wisdom
is out there and accessible, if you know where to look.
4. Is the business tuned up to get you there?
Only after the family's own plan is in place can the
complementary business plan be developed. It will require unanimity
and clarity among the owner and his/her leadership team, especially
the four lieutenants in the FISH Capital® disiplines: Financial,
Intellectual, Social and Human.
5. Do you have a map and itinerary?
Every business has a strategy, of greater or lesser complexity
and quality. Middle market family businesses tend to embrace the
simple over the complex, and 'Strategic Planning' has probably
scared off many more than it has helped. The best ones are
'S.M.A.R.T.' - Specific, Measurable, Achievable, Relevant and
The Only Constant is Change
Don't settle for just managing change - lead it to where you and
your family want to go…