A valuable question for a lawyer to ask to assist a succession or estate plan is “what are the goals you hope to accomplish through the planning process that allows us to produce the documents to guide your family in the future? What are the family principles and values that guide your decisions?”
One of the questions we regularly ask clients is “do you have an up to date will?” The most common response is an admission that there is no will, or that their will is out of date, “but we are planning to get them updated.” This is very understandable. Wills and other legal documents are put in place less for active management of our day to day affairs, and more for guidance when things are not going the way we would like (eg. death, divorce, partnership break ups, and so on).
I recently listened to a retirement planner who asked the group what they thought “retirement” actually meant. He let us discuss a variety of ideas, and then provided us with his working definition: “Retirement is when you do not work because you have to, though you may work.” His concept is that – at some point – many people do not need to work in order to meet their financial needs, but they may work to satisfy other needs.
Deciding who leads the company next (whether in the first chair or a supporting role) is a key responsibility of the current company leadership and ownership. However, it is a decision and process that is often left late, or not done nearly as well as it could be. That is understandable – especially in a small to mid-sized company (where there is a smaller group of insiders for consideration) and family-owned businesses, where several extra factors come into play.
Most successors I meet are more than ready to go. Generally, they are even somewhat frustrated by the hesitation of the Founder to get out of the way and find it hard to understand why more trust has not been transferred to them in leadership. Even this past month, I met with a successor who was mystified by why the previous generational leadership was not moving more quickly to adopt his ideas and moving ahead to put him in key areas of responsibility. In fact, this young leader was wondering if he had made the right choice in coming to the family business, and was considering going elsewhere.
Recently we held a first Family Council for a business transitioning between generations 2 and 3 (with the Founder still in the picture). When we planned the meeting, the leaders of the business let us know they only wanted those family members active in the business to attend the Family Council. This is a common approach for people unfamiliar with such meetings, and not surprising since the topics which are often top of mind for these leaders are typically transition issues in the business which primarily affect those working inside company walls.
Entrepreneurs looking to transition their business – whether to the next generation, non-family management, or via sale to an outside party – need to consider what is needed to successfully lead going forward. Chances are, the old adage about “what got you here won’t get you there” applies, and it is unlikely the recipe for success in the next 10 years will look the same as the past 10 years.
Entrepreneurs generally don’t like to think about mortality – especially their own. I recently had a situation that brought this home in a personal way. Running in the desert mountains is my happy place, and I had left before dawn and headed out for a one hour run on a rocky trail. Thirty minutes in, I tripped and fell. The good news was avoiding the cactus. The less good news were the rocks that shredded my hands, shoulders, hips and elbows.
As the owners of family businesses age, a common question often arises about whether to sell the business to the highest bidder, or pass it on to future generations of the family. And since we are talking about families, this is an decision which – for many, but not all – can have a lot of emotion attached. I find there is no “one size fits all” answer to the question, but there are some clues which can help guide navigation of the issue.