“the night before closing the deal. My brother and I sat in a car in the parking lot outside the office building and reflected about whether we failed in carrying on the legacy”
Many family businesses are caught in the dilemma of whether to pass along the business to the next generation or sell the business. The senior generation needs to plan for retirement and feel confident that the younger generation can run the business, and the younger generation has to decide whether they want to stay involved or move on to a different career . Unfortunately, most of the time the family legacy affects the decision. This legacy can become a burden and lead to a demise of the business if the succession plan includes a younger generation who is continuing on for the sake of the legacy of the founders rather than following their true ambitions.
In our family business, our parents removed the legacy issue as an issue, by letting us know that they no longer felt the business was personal, but that it was a business. Our business had grown to a size that we no longer considered it a lifestyle business, but rather a professional business. This helped us remove the emotional aspect of the business, when we decided to bring in private equity to help fund the growth of the business. Part of this process included having to give up some minority control in exchange for the private equity infusion.
In saying that it removed the emotional aspect of the business, doesn’t mean we didn’t care. I remember the night before closing the deal. My brother and I sat in a car in the parking lot outside the office building and reflected about whether we failed in carrying on the legacy of the business. We were only ceding some minority control, but it felt like we were selling the business. Giving up any control in a private business is hard to fathom, particularly in a family business, where it also involves the added personal aspect of the family legacy. What helped us through the situation was our parent’s mentioning they no longer felt that it was a personal business, and we should feel no pressure in carrying on the legacy.
The takeaway here is to find time to meet as a family to discuss the importance of the legacy of your family business. It’s amazing to think that this most important discussion about the future of your business, almost never takes place, because it touches on so many sensitive and awkward issues. To expedite these discussions, try keeping them separate from the succession planning process. Even though it is directly related, it’s important to get an initial indication on how all family members feel about the continuity of the family in the business. After all, this is the first step in determining your exit strategy, whether it is sale or succession. The outcome of these discussions can be disappointing or enlightening. Either way, once the mystery is revealed, everyone can work towards a common goal.