Mixing Family + Business With the Help of Coveted Financial
The casino billionaire Sheldon Adelson once asked, “Why would I need succession planning? I have no intention to retire.” His question was answered on January 11, 2021 when Adelson died, leaving it to someone else to define the roles of his wife and five children in a $40 billion enterprise.
While we need not worry about the security of Adelson’s heirs, succession for a more typical family-run business can be critical to that family’s long-term wealth. According to Family Business, only one-third of these enterprises will remain family-run after the first generation, while two-thirds will transition to a sale or other dissolution of family control.
If you founded a business and a family, you may have a vision or at least a set of preferences for the future direction of both. As with everything else in business, a successful outcome for your succession will require that you develop and execute a strategic plan. However, succession is unique in strategic planning because of the tension between the needs of the family, which may be highly personal, and the needs of the business, which must be practical and impersonal.
As both parent and business leader, you face a contradiction; that while every heir is equal in their right of inheritance, they are not likely equal in business interest or business acumen. You need a plan designed to accommodate complex demands, over what may be a span of some years.
To navigate this paradox, consider working with an experienced and impartial succession advisor. At Coveted Financial Services, we have a substantial track record of success in helping our greater Chicago clients navigate the unique challenges of family succession planning.
Here are ten ways Coveted Financial Services can help you improve your succession plan:
1. Start at the Finish Line – A Coveted advisor can help you fully envision the key outcomes and endpoints of your succession plan, then creating the detailed milestones that will need to be met along the way.
2. Share the Plan with Stakeholders – Discuss your plan with employees, key customers, vendors and financial partners. The existence of an orderly plan shows foresight, builds confidence and paves the way for the future leadership.
3. Anticipate Conflict – One family member may feel that a sibling was more favored. A key employee may feel passed over for family. Your succession plan must be a comprehensive organizational plan, justified at every level.
4. Manage Your Role – Your team links their sense of security with your leadership. How will they get by without your qualities as a skilled, tough and wise leader? Questions about succession will undermine their confidence unless your plan provides satisfactory answers.
5. Make Sure All Successors Add Value – Inheriting a business is a great legacy, but it doesn’t necessarily follow that a job must be part of the bargain. The children of founders sometimes have the interest and aptitude to be contributors. And sometimes they do not. An experienced succession advisor can use these factors to create options for fair and practical planning.
6. Set High Standards – Successors who will become active in the business must have qualifications equal or superior to non-family employees at the same level -- and family members must be held to the same standards of performance, discipline and organizational accountability.
7. Take The Time to Do It Right – Senior managers need time to document and transfer institutional knowledge to the next generation, and members of the owner’s family need time to earn the skills and experience they will need to take the reins.
8. Blend the Succession Teams – A complete plan envisions future outcomes for every key position, whether or not the incumbent is a member of the owner’s family. A comprehensive plan ensures that both family and non-family contributors will see a clear path to future leadership.
9. Nurture Non-Family Perspectives – The Brookings Institution noted that almost half of Fortune 500 companies were founded by a newcomer to the United States. When designing your leadership structure, bear in mind that non-family managers and mentors will bring a fresh outside perspective which broadens the creative knowledge base of the successors.
10. Choose an Impartial Sounding Board – Your spouse and children will have strong opinions. Lawyers and accountants will zero in on earnings, taxes, inheritance and other technical elements. Each voice must be heard, but none should hold an outsized influence. This is where a CFS advisor can serve as an experienced and impartial sounding board for critical decisions.
To learn more about working with a counselor to help manage your family business succession plan, talk with a CFS advisor. Visit Coveted Financial Services at www.covfinancial.com, or call 331-442-4472.