Preparing for a family business succession conversation
Open and clear communication is necessary for many business decisions, and no more so than before a family business is set to be transferred. This discussion outlines important, specific topics those involved on all levels should consider.
By Steven Seel, Wealth Strategist and Dan Griffith, CEPA®, Director of Wealth Strategy
When planning to pass down the family business, owners grapple with challenges common to all companies, but with the added overlay of family dynamics. Will one child feel less favored? Is an uncle still seething over a succession plan he opposed? Will your sister think she’s being pushed aside?
Open communication will be key to easing tensions, avoiding strife, creating a shared vision for the family business, and resulting in more effective leadership. Getting everyone talking can be particularly important when a business is being transferred to new leaders inside or outside the family. For constructive and efficient conversations, there are several issues to consider.
What’s necessary for a constructive family business succession conversation
Before sitting down to discuss important family matters that may change a person’s life or significantly disrupt a family’s dynamics, it would be wise to consider some guidelines to avoid or reduce such impacts.
- Create the right guest list. Invite the people affected or involved in a planning decision, but not every person needs to attend every conversation. You may want to have separate conversations with those who are actively involved in the business and with the nonactive participants.
- Invite an objective outsider. Family dynamics can throw a meeting off the rails without warning, so an impartial facilitator can help keep things on track. An objective, non-threatening outside party can sit down with everyone, talk through the planning process, and ask the right questions.
- Get an early start. The sooner you begin including family members in business conversations, the easier it will be to make family communication a habit. Starting early can also help you manage inevitable changes and difficulties—including the fact that the younger generation may need more time to prepare or may not want to participate.
- Set limits on information. Involving more of the family doesn’t mean disclosing everything to everyone. As you prepare for a family conversation, consider what should and shouldn’t be on the planning agenda. Each participant may require different types of information.
- Incentivize participation. Some invitees may be reluctant to attend. You may be able to draw family members in with incentives specifically tailored to them. These lures could be financial, emotional, or something unique to your situation–whatever you feel might work best.
- Keep a specific focus. It’s easy for family business succession planning meetings to get hijacked by long-buried resentments and other personal factors. If you see that developing, move quickly to get the conversation back on track. You can acknowledge people’s points, but move on, saying ‘It’s not our intention to favor one person over another. We’re here for family business reasons, and these are the ultimate results we’re looking for.’
- Be clear. As important as it is to have open communication, it’s also essential to be clear about who’s in charge and who’ll make final decisions . Ultimately, the people who own the business have the right to do as they want. If they want to donate it to charity or sell it to an outside party, they can.
- Coordinate a date to meet—and soon. The longer you delay getting the family together to talk, the more likely that the meetings will never happen. Start as soon as possible—and that basically means today, even if all you do now is schedule a meeting for six months from now. The sooner you’re doing it, the more options you’ll have—and the better the probability you’ll get the result you’re looking for.
"I tell my clients who are planning these talks to start as soon as possible—and that basically means today, even if all you do now is schedule a meeting for six months from now."
Wealth Strategist, Huntington Private Bank®
With so many factors involved with family business successions, open and frank conversations are necessary for a successful and (hopefully) strife-free transition. Structured and thought-out discussions can be constructive and efficient with the help of a qualified team. To learn more, please contact your Huntington Private Bank team to see how we can help or find a Huntington Private Bank office near you.
The information provided is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering tax, financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.
Huntington Private Bank® is a team of professionals dedicated to delivering a full range of wealth and financial services. The team is comprised of Private Bankers, who offer premium banking solutions, Wealth and Investment Management professionals, who provide, among other services, trust and estate administration and portfolio management from The Huntington National Bank, and licensed investment representatives of The Huntington Investment Company, who offers securities and investment advisory services. Huntington Private Bank® is a federally registered service mark of Huntington Bancshares Incorporated.
The Huntington Investment Company is a registered broker-dealer, member FINRA and SIPC, and registered investment advisor with the U.S. Securities and Exchange Commission (SEC). The Huntington Investment Company is a wholly-owned subsidiary of Huntington Bancshares Incorporated.
Certain insurance products are offered by Huntington Insurance, Inc., a wholly-owned subsidiary of Huntington Bancshares Incorporated, and underwritten by third-party insurance carriers not affiliated with Huntington Insurance, Inc.
Trust and certain investment management services are provided by The Huntington National Bank, a national bank with fiduciary powers. The Huntington National Bank is a wholly-owned subsidiary of Huntington Bancshares Incorporated.
Non-Deposit Trust, Investment and Insurance products are: NOT A DEPOSIT • NOT FDIC INSURED • NOT GUARANTEED BY THE BANK • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • MAY LOSE VALUE
Third-party product, service and business names are trademarks/service marks of their respective owners.