Often, succession plans for family businesses only consider the technical aspects of the business. However, it is just as important to consider the softer sides of the business. A recent article discussed the importance of creating a succession plan that considers the technical, as well as soft aspects of a family business.
When engaged in succession planning, most family business owners focus on the technical elements of business planning. This is important, as business transfers carry significant tax and legal implications. However, the technical elements of the transfer should not be the business owner’s sole concern. Business owners need to also consider the “qualitative aspects of leadership, communication, and control over decision making.”
One business owner set his company up for failure when he ignored these considerations when he passed his company evenly on to his five sons. The owner left no outline for a decision making structure between the sons. The business quickly fell apart, as the sons had no clear sense of direction and engaged in a power struggle.
In order to plan for the softer side of a business transfer, it is important to create a plan that will manage family relationships. Through this type of plan, the business owner can dictate a decision making structure for his or her successor children to follow. Such a plan can help avert disaster when successor children disagree about leadership and direction.