Succession planning can be one of the most challenging aspects of owning and operating a family business and sometimes the right succession plan is to sell. This might be the case for multiple reasons including destructive family dynamics, conflicts in vision, lack of interest by the next generation, lack of passion by the current generation but also reasons that any business might face such as concern about increased regulation or exposure to potential liabilities.
Whatever the reason, after the decision is made to sell and the deal is done, both the family and individuals within it can struggle with the loss. Having worked with many family businesses over my life it is very clear that business and personal aspects are deeply interwoven in family-owned businesses. The business is often the result of generations of a family’s hard work and devotion and may have created expectations about continuity, tradition, unity, dividends and family employment.
On the positive side if the business is sold for a substantial sum it can provide financial freedom for the family or individuals within it to accomplish other goals. Some families may choose to create a family office and channel their shared goals and vision into its management and investment decisions. Other families might choose to start a new family venture, without the problems that led to the sale of the previous business. Others may choose to manage their money individually.
Whether or not family members choose to create a family office or manage their money individually, a large amount of liquidity presents its own issues including how to preserve it. This would usually involve making decisions about setting up trusts, diversifying assets across industries and markets and how philanthropic they want to be.
But even with a plan for what to do after the sale of the business, it is very likely that members of the family may struggle with feeling like they’ve lost a part of their identity. Particularly if the business was founded several generations ago, it can be hard not to feel a sense of failure and guilt of letting down the family or failing to fulfill the legacy passed to them. Without the company, the family’s perception of itself and its purpose can change. A company often holds families together by giving members a shared identity and closeness established by previous generations. It’s an unfortunate reality that selling the business that glues the family together may mean some members of the family slip away but it also provides an opportunity to create opportunities to connect with one another around social events rather than in the boardroom.
Of course for some families, the sale of the family business is a welcome opportunity for individuals to choose their own paths. Whatever comes after the sale of the business, one thing that is certain is that having a solid plan for how to work, live and invest following the sale of the business is key. The family’s success may no longer be tied to having its name on the wall but its success may continue in other ways with family members following their passions or working together to preserve a financial legacy for the next generation.
If you’re considering your options for business succession and would benefit from outside help please do get in touch with me via Michael@fiduciapartners.com. Among our services as a multi family office Fiducia Partners provides discreet introductions and expert support for strategic challenges.
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For more of my insights into the world of investments and family wealth visit the Fiducia Partners website.