Business Succession series – 3. How To Avoid Family Conflict In a Business
Whether you are a new start up or a well-established business, getting your business succession plan together could alleviate some serious future issues. Regardless of whether the proprietors of your business are your best mates, family or strangers, please read to understand more about the importance of business succession plans.
Do you know what your business succession plan is?
Why do problems occur?
Mixing the business and family can be complicated without proper direction and planning.
Family business brings more complexities to the “board/kitchen” table than non-family business, such as sibling rivalry
One of the key elements for successful family business is that they often have prepared the successor generation over a long period of time who have been and continue to be mentored by the senior generation.
The following is a real example of a case our Business Team encountered;
For the successful transfer of management and/or ownership of a family business the senior and the successor generations need to have ongoing discussions in order to have a unified vision for the business and the family.
A generational farming family with two brothers who had worked together for all their adult lives came to see me to start the process of handing over the business to the next generation.
There had been no preliminary discussion between the brothers as to their expectations.
During the discussion it was stated that the children of one brother could not work with the child of the other brother, notwithstanding that they in fact worked together for the past decade without any hint of the underlying conflict.
How can this be avoided?
- Integrate their succession plan with their business, retirement and estate plan.
- Consider on what basis future family participation will be in the management of the family business
- Promote family on merit not on bloodlines and insist on family members obtaining experience outside the family business.
- Look outside the family business for managers and mentors.
- Reduce the potential of conflicts by having a clear profit distribution and retain earnings strategy.
If you want to get in touch and learn more about how this might effect your business, please contact us and speak to our expert business law team today.
Written by RNG Lawyers Partner and commercial lawyer, Adrian Riccioni