60% of family wealth transition failures can be attributed to the breakdown of communication and trust within the family unit.
SOURCE: Roy Williams and Vic Preisser, Preparing Heirs (San Francisco, Robert D. Reed Publishers, 2003)
Building and maintaining a successful family business over multiple generations poses a significant challenge. As families expand with spouses and children, it can become complicated to ensure everyone has a role they are suited for and promotes ongoing business and personal fulfillment. While it is inevitable that complications will arise, there are steps families can take to enhance the likelihood of long-term business sustainability.
In this paper, we discuss in detail eight identifiable best practices common to families who have successfully navigated major business transitions. By paying attention to each of these best practices as early as possible, a family can increase its odds of creating a succession plan with all family members contributing in their own way to the business success and family legacy.
- Early planning for the transition of a family business can be vital to success. Consider building an exit strategy into the business plan.
- It’s helpful to have a comprehensive approach for helping next generation family members become responsible, educated, and competent regarding wealth matters.
- Open, ongoing discussion between parents and children help to set realistic expectations and to uncover any concerns or conflicts.
- Putting structures in place, like regular family meetings and periodic financial reporting, can help provide objective data to everyone involved and an opportunity to share thoughts and opinions.
- It’s important to select advisors who have worked with family-owned businesses in the past, and who have experience in succession planning, family business transitions, and navigating family dynamics.