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Pure Perspective

A blog to empower your financial wellbeing and security

Family Business Succession: Preparing for your Next Generation

7/15/2023

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​According to Price Waterhouse Cooper’s 2023 U.S. Family Business Survey, one-third of family businesses have a succession plan in place. Is this the case for your family business? A 2020 Harvard Business Review article on family businesses affirmed that “the best business succession hand offs are often years in the making.”


When the plan is to transition the business to the next generation, all too often, the mindset is to just hand of the reins. Having worked with multiple generations of family businesses, the first stage of effective planning is to incorporate the business succession planning into the family’s estate planning, understanding that to do it right, time needs to be invested with a clear strategy of succession factors in place. 

It starts with asking some key questions related to your business, including:
  • So, where do you see your business 3-5 years from now?  
  • Who should run and manage the company or specific parts of the business?  
  • Are our values in alignment and how will what is not in alignment impact the business built? 
  • Does my next generation appreciate what was built over the years?  
  • Does our next generation have the patience and expertise to either sustain or grow the business? Are they the right ones to manage and grow the company?
  • How will nonfamily partners or shareholders be impacted?
  • Does the business have a strong team of employees to continue to help the family business flourish in support of next generation family members?

These questions will be answered when you have put in place the right business continuity plan.  

With estate planning, we then ask the question, “How do you want to treat your heirs…equally or fairly?”  This question is especially important when you have multiple next-generation heirs, yet not all are engaged in working in the business or have an interest in working in the business. This question helps clients shift their perspective to thoughts about who should really get what, why they deserve to get what they get, and whether they can handle it once they get it.  
When estate planning with a family business, answering these questions  can help begin the process of estate and succession planning in unison:
  • Who should be the benefactor of all “my hard work” in building the business? 
  • Who should be the benefactor of all “my hard work” in building a portfolio of assets?
  • Who should get what and in what amount?  
  • What benefits do you want to realize in retirement, once you hand over the business to your next generation?
  • What would you like to happen both personally and professionally?
  • How do we avoid conflict among siblings?
Preparing to Succeed: Making sure you have people with expertise and experience, who are engaged in the business culture is paramount feeling confident about your succession plans. Knowing these key people, family members and nonfamily members, helps you determine the pace of your business transition.  Like our blog about my preparation for the Boston Marathon confirmed, you can’t and shouldn’t just go out tomorrow and hand over the business.  You need to prepare with intention, clarity, and the proper protections in place. 

Employee Collaboration: When more than family members help make the business run smoothly, it is important to approach the transition with a collaborative spirit in mind. It takes attention to their mentoring, coaching and any cross training that needs to occur.  There comes a time when you can’t and shouldn’t perform all of the functions you may currently be managing.  Especially if you are the rainmaker who is supposed to be continually filling the top of the funnel, how will you set your company up for success by engaging others in being the rainmakers along with you?  

Client Engagement: Another aspect to consider is methodically planning how you introduce your team or next generation to new or existing clients that only know you as the company.  It takes discipline to stay true to the process and the people involved in the success of the business transition. Clients and customers should know that this is happening over time, not abruptly. Knowing that there is someone to service them who has been a part of the company, training, learning, and growing in knowledge and ability builds confidence and trust.  When you have been disciplined in engaging clients in making the transition, they should be comfortable with the changeover when it fully occurs.  
Keep in mind that transition is not an entitled transaction. Just because a son or daughter is working in the business doesn't mean you are obligated to succeed it to them. 

Start transition planning by leading the company strategically with the same disciplined approach you incorporated when you first started and built the company. 

Empowering generations,

Matt

​
Matthew Hudack, CLU, ChFC

This communication is for informational purposes only and does not purport to be a complete statement of all material facts related to any company, industry, or security mentioned. While not guaranteed as to accuracy or completeness, the information provided has been obtained from sources believed to be reliable. The opinions expressed reflect our judgment now and are subject to change without notice and may or may not be updated. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. This notice shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which said offer, solicitation, or sale would be unlawful before registration or qualification under the securities laws of any such state. The newsletter from which this article was taken was initially prepared and distributed to our valued clients and industry partners. Readers who are not market professionals or institutional clients of Financial Synergistics Group, Inc. should seek the advice of their financial advisor before making any investment decisions based on this communication. Additional information on any securities mentioned is available on request.
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    Welcome to our Pure Perspective blog, designed to provide insights, information, and options for you to consider whether you are beginning your financial journey, accumulating wealth and assets, or supplementing in your retirement years. Through decades of serving multiple generations, we have served as a sounding board, a guide, and advisor when critical decisions needed to be made. 

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  • Home
  • WHY US
    • Generations Strong
    • Family Centric
    • Pure Perspective Process
    • Planning Integrity
    • Productive Know-How
    • Circle of Influence
    • Lead by Example
    • Agile Solutions
    • Future Focused
  • WHO WE SERVE
    • Familes & Individuals >
      • Actively Outdoors
      • Inspired Retirees
      • Multi-Generations
      • Philanthropic Singles
      • Rainmakers
      • Suddenly Single
      • Young Professionals
    • Businesses >
      • Solopreneurs
      • Start-Ups
      • Family Business
      • Mature Business
      • Transitioning Business
  • WHAT WE OFFER
    • Individuals & Families >
      • Estate Planning
      • Family Wealth Planning
      • Retirement Road Mapping
      • Life Insurance
      • Protection Strategies
    • Businesses & Owners >
      • Asset Protection
      • Business Structure
      • Business Transition
      • Employee Retirement Plans
      • Executive Retention
  • INSIGHTS LIBRARY
  • PURE PERSPECTIVE
  • GIVING BACK
  • OUR TEAM
  • NEWS
  • CONNECT