Family Business Succession, You Must Rethink Your Organizational Structure

When it comes to family business succession planning

, possibly the most important element is attitude, especially when it comes to the senior generation's willingness to redesign the business's legal structure. OK, each of the other keys to family business succession planning are the most important ones too. That's because they all depend upon and build on one another.

Planning for family business succession does not have to be difficult if everyone is willing to communicate early and often, and being willing to address the possibilities that can be achieved by redesigning the company's legal structure is one of the important topics for discussion.

If your business is organized (legally as a corporation, partnership, etc.) the way it has been organized for the last few decades it's probably because, operationally at least, there has not been a compelling reason to change. Now you just may have some reasons why the company needs reorganizing if it is to become the vehicle for achieving your family's dreams and goals for the future.

Here are some areas where the business you are now operating can use an organizational facelift. Your unique situation may call for other changes to be made if you are to be successful passing down the farm to the next generation. Perhaps it is time to consider separating the company's ownership from its management.

Often the actual legal business ownership is the last thing people are willing to talk about, much less take action on. But that doesn't mean they should wait to begin transferring management related tasks and responsibilities to the next generation successors.

Doesn't it make sense to begin training your successors today, letting them make the inevitable mistakes while you're still around to offer advice? This is also a test of the senior generation's willingness to face the reality that someday their son or daughter and their family will be making all the decisions.

Leadership and management are two abilities they can only develop on the job. By the time you are all ready to begin transitioning ownership, you'll feel more comfortable in their ability to run the place successfully. A major stumbling block, one that most often results in the "wait and see" approach that can be disastrous for everyone is the senior generation's unwillingness to face the fair vs equal question.

Perhaps if you considered it differently, putting the efforts and commitments of those who are going to be running the place in the next generation in one camp and those you believe should receive a legacy because they are family in another. It's not that anyone is loved more than anyone else - it's that for whatever reason they have chosen where they'll spend their lives in the future.

Those who will own and run the business in the future already have their inheritance - the opportunity to live the life of their choice and build on what you've accomplished. So why not organize the business to pass the growth on to them and set aside money for the others starting today.

Once thing you might consider is to make gifts to your heirs now while they are building their families and while you are here to see how they too are benefiting from your legacy to them? And last in this article but first in everyone's mind is the financial security of the senior generation when stacked up against the growth required to make good on all the promises to everyone.

The senior generation members are nearing the time when they will want (need) to begin receiving income from the business that is not tied to their day to day activities. Call it retirement for lack of a more precise term.

The younger generation wants to grow the business at the same time. The result can be very stressful for both groups. My suggestion is solve the senior generation's concerns first. They deserve to see where the money is going to come from, how taking more or less money will impact the organization's growth, and what options are available to them.

Solve their concerns first and they will put the same amount of determination into the company's future as they have throughout their lives. Succession and planning take place over time and the material above is for the important family meetings you'll be having.

Planning for succession often involves mastermind group conversations where you can test from others involved in the process, and professional insights from your advisors - individuals involved with your planning for succession process. I hope you'll consider a self managed mastermind group when creating the framework of your succession and planning.

by: Wayne Messick

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