July 14, 2015

By Steve Brilling

For many people, owning and running a family business is about building a legacy. Their endeavors are not just about current business success but about providing a business platform for future generations. And yet, many family businesses miss some fundamental building blocks that help ensure generational handoffs – leadership transition plans and seeking outside counsel. The trick is to give these areas the same priority as the other business challenges facing the company.

Let me share a personal story to help make the point. I grew up in a family business, a wholesale company out of Spokane. As the oldest of three children, I was the one deemed most likely to take over the business after college. As my father painted a nebulous succession picture to me, my mother was whispering in my ear to go out and seek my own destiny. In hindsight, she may have wished otherwise.

I took my mother’s advice and never looked back. Roughly five years later, my father had a fatal heart attack and left the family with no succession plan and an outdated will. My mother, at a time of sorrow and desperation and without outside counsel, decided to turn the business over to my sister and brother-in-law in exchange for a lifetime annuity. Questionable plan, bad execution.

My sister and brother-in-law were totally ill-prepared for their new roles and in less than five years, the company went bankrupt. No one was there to help our family handle the turnover of the business. No one was there to help my sister not make what were, ultimately, fatal business moves. It was not so much a question of turning over the business to the wrong person, it was more about a lack of good planning, training and coaching.

Our family business legacy became a tale of lost dreams and financial heartbreak. I can tell you that, if our family had sat down together and used good outside advisers, we might have avoided this all too common sad story.

Today, my sister and brother-in-law are business savvy and successful, but they have never forgotten the lessons they learned in the hardest possible way. They suffered terribly, we other siblings grieved our losses, and my mother went to her grave scarred by this potentially avoidable situation.

A family legacy must be safeguarded. Family business leaders who do not make succession planning and outside counsel a priority run the risk of seeing their dreams go up in smoke.

© Clark Nuber PS, 2015.  All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.