Successfully operating a family business - and preparing to pass it on - may seem like separate issues. In reality, they are not. The strengths, skills and persistence that built a successful business can also help prepare that business for a successful transition. That is why it is difficult to watch the value of a family’s most significant asset evaporate for failure to “plan when you can.”
Once you have committed to identify your options, the next step to a successful transition is to identify your desired result. This may sound simple but it seems to be where most business owners stall because they can’t see how to get from where they are to where they want to be.
Take the example of a “land rich but cash poor” ranch where one child wants to continue the ranch but the other children have no interest. If the ranch is to continue to the next generation, will the child who wants to ranch be required to work with children who really just want the ranch to be sold? Or will the ranch have to be sold so that each child receives an equal share? If the ranch is not sold, must the other children be left out in order to ensure the ranch can continue under the direction of the child who still wants to ranch it?
Understandably, many family business owners see this as an “either/or” conundrum. They can ensure the ranch continues, but only by depriving the other children. Conversely, they can ensure each child receives an equal share, but only by selling off the assets. They fear anything in between will force children with completely different interests and motives to work together.
In reality, there are several other options to consider; and there are even ways to pass on cash or other assets to some children and still pass on the family business to the child or children who are interested. More on this in my next column.
© 2016 Steven J Wright