Imagine running a relay race. Each person has to be individually competent but the thing that can trump the whole race is the hand off. Drop the baton and the team is disqualified. If you have a family business you are in a unique position to hand off to the next generation a great opportunity. Sadly, many experience heartache when passing the business on to their children: businesses fail but more importantly families are ruined, broken apart by unrealized expectations and misunderstanding.
Family business succession is an important topic because it affects many of us, indirectly. In the United States, family businesses employ 60% of workforce. In Canada the number is closer to 50%. Worldwide, in the Organization for Economic Co-operation and Development (OECD) countries – including France, Mexico and Sweden – more than 90% of businesses now have fewer than ten employees and are family businesses.
As Thomas William Deans says in Every Family’s Business, handing off a business is largely about setting realistic expectations, avoiding surprises and just plain communicating, and this can happen many, many years prior to the turnover of the business. Through this fictional story based on the real life events in 3 generations of the author’s family, you can discover some essential steps.
Good hand-offs and healthy conversations can begin with the twelve common sense questions outlined in Deans’ book. He says the most important lesson for children to learn, is a business is always for sale. The question children need to answer is whether they want to be the ones to buy it. This, and other questions help all family members focus on what roles they want to play in a business-if any. A family with open communication creates an environment with choices and options for every member involved. In this way, every family member’s expectations are voiced and there are no surprises.
What’s really at stake is whether children are ready to risk their own capital to buy the business or not. Jesus himself illuminated this idea.
For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?
Speaking to financial planners, lawyers and accountants gathered with business owners, one statement Deans makes always receives an uneasy laugh. “In this room there are children who believe their parents will gift their business to them, and parents who believe their children will purchase their business.”
Don’t let this widely held assumption be the case in your family or families you know. There is no doubt God wants us to pass on an inheritance to our children.
“A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous”.
Everyone wants to leave their children a rich inheritance. I believe this has very little to do with money. Money is almost counterproductive. Rather a rich inheritance comes in the form of wisdom, understanding, knowledge and skills passed on through the generations.
If you are passing along a business though, get this blueprint and use the twelve common sense questions to start the dialogue in your family. Set everyone’s expectations straight early to avoid any misunderstanding. Every family business can pass on a rich inheritance by reading Every Family’s Business.
Attitude: Humbly ponder the legacy you are leaving your kids.
Action: Order Every Family’s Business to help pass on a rich inheritance.
Question: What wisdom, understanding, knowledge and skills are you passing on as an inheritance?