Operating "a family business" is a classic American dream, the likes of which rival home-ownership, white- picket fences, and freedom of speech.
Family businesses show up in many industries, ranging from the classic "family farm" to a holding company LLC that owns a consortium of privately held real estate investments. Regardless of the industry, there is one common problem that is universally felt by all family businesses - succession planning!
Succession planning is about preserving the legacy of your generation and at the same time preparing the next generation to succeed. This process is different for every family and it is often more emotional than financial. Because the process of succession planning can be emotional and complicated, 80%+ of all family business never actually do it!
Many well-intentioned family businesses are built around the idea that leaders from the next generation can simply step into the large shoes of their predecessors and run the business (and the family) exactly as mom or dad would have. That mindset fails to take into account that each new generation of leadership has different skills and interests, and that business contexts and needs inevitably shift over time.
When a family business assumes that the next generation can simply take over without pausing to consider the CEO job description, governance, or the evolving business context, they may be setting themselves up to fail. Succession planning in certain industries, like farming, can even be more complicated — especially when there are multiple heirs, some of whom may not be involved in the family farm.
The solution?
Hire an experienced third party who has successfully navigated family succession planning and supported families through generational wealth transfer.
A natural starting point for families that are committed to solving this problem is to hire a technical professional like an estate attorney or accountant. Although these technical resources will most certainly be needed, it is a common mistake to start the succession process by solving for financial and administrative needs. You may be lucky enough to find a technical professional that possess strong interpersonal and communication skills, but this is not always the case. Picking the right provider that can facilitate open dialogue and an emotional exchange between family members is tantamount.
It is critical that family members are able to sit down and have an open discussion about their goals and feelings. This gives everyone a chance to voice their vision of the future and can prevent surprises down the road The types of questions that should be considered are:
What do you envision for the future of your family business? Are your family members on the same page?
Do you want to stay involved in the operations? What does that look like to you?
What kind of income do you think you will need for retirement from the farm?
How to you feel about paying income taxes on the transition?
If you don't stay involved in the operation, do you understand what that means in terms of your inheritance and relationships with those family members that remain in the operation?
Monroe Professional Services
Monroe professional services has supported many family operations through succession planning. We have specific experience in the agricultural, real estate and service industries and work with a cadre of niche estate providers that are experts in their technical disciplines.
We support families through an extensive planning and execution process, where we initially serve as an advisor and then, upon execution of will or plan, act as a trustee, fiduciary, or administrative representative. We have also provided outsourced management of family business affairs in situations where a family member is incapacitated or doesn't have the capability of managing the business on their own.
Our approach always starts with the family first. Interested in learning more? Email info@mikemonroe.pro to set up a time to meet.