Family enterprises rarely start big – they are granular, organic, fluid and responsive as they find their feet. They often get built around the entrepreneur who enlists the support of others who either share the dream or who believe in the entrepreneur and want them to succeed – family members are a natural fit.
If all goes to plan over the next three or so years and the small business has survived the 60 per cent mortality rate, that idea that first came to life in the home office, garage or storage shed is now growing steadily and is more independent of the sheer blood, sweat and tears of the owner and their family.
And when it comes time for the original founders to step back from the business, succession plans begin. With all that has been invested personally and financially – all the sacrifice, anxiety, joy, heartache, arguments and inspiration – the idea of leaving a legacy, passing the business on to the next generation makes perfect sense.
But does it?
There’s a critical error that many family businesses make when succession planning: not asking the question, “Is this a good idea?” The truth is, passing your enterprise to the next generation is not the only sign of success. Kenneth Kaye, in his book The Dynamics of Family Business, provocatively put forward the notion that the family business may be a sickness that continues to hold generations in a stagnant state of development. So, it’s worth asking: is the business intrinsically good for the owners, the family, its employees, its customers and its community?
Sometimes the answer is simply that it is not healthy for this family to be in a family business and that the healthiest outcome is that the assets be liquidated so that each party can go and make their way in the world with a fresh start.
These are not easy conversations. Here are three ways to make them easier:
- Before you have the conversation, consider what are your own values, wants and dreams – this will help you to navigate the inevitable strong emotions that often emerge in a significant conversation.
- Listen out for the interpretations different family members are holding about vision, values and what they want for themselves and for future generations. This will help to provide a shared starting point.
- Go below the surface. Don’t just listen at the surface level of what someone is saying. Listen for concerns and your empathy will have an opportunity to develop.
Management structures, legal and financial vehicles and strategic planning are all part of the succession journey but listening to the hopes, dreams, concerns and doubts of the family is the foundation. Avoid that at your peril.