4 key steps for clear family communications during business transitions

Business owners beware: The do-it-yourself approach to business transition has only a 30 percent probability of success, according to research presented in the book, "Preparing Heirs: Five Steps for a Successful Transition of Family Wealth and Values."

That means people and assets are only 30 percent likely to make it into the next generation. What increases that probability of success to a whopping 80 percent? Open communications and a resulting plan on the part of owners who choose to pass the business down rather than sell it.

Get stakeholders on board. A clear understanding of the owner's transition intentions is important to all stakeholders in the business and family. This includes company shareholders, family members and their spouses. Engaging in facilitated open dialog gets everyone on board and guides the owner's vision for a successful transition, which can happen over several years.

There are four basic steps in the family communication and decision-making process:

1. Confidential conversations with each stakeholder

First step is to involve a neutral, third party (trusted advisor) to hold individual conversations with all stakeholders. These conversations are a consistent, confidential way for people to express their thoughts and help owners understand the best foundation for a transition plan.

In this way, everyone is included — no one is excluded — and, almost always, each person is thankful to be part of the process. Questions to ask each stakeholder:

  1. What are your hopes and aspirations for the business and its future?
  2. Do you see yourself involved in the business? If so, what is your desired role?
  3. What are the benefits of being involved in the business?
  4. Are there any other issues to put on the table?

2. Options to move forward

Based on step one, the ownership reviews the major findings with the trusted advisor and considers:

  1. What are areas of agreement?
  2. What issues need to be resolved before moving forward?
  3. Is there a preferred option for moving forward?

3. Meet with all stakeholders

The third step is to facilitate an information session that clearly communicates the owner's transition intentions to all stakeholders. The purpose of the meeting is to share information, not gain consensus. This is not the time for problem solving, decision making or voting. Yet, the owner is looking for passive consent where everyone says, "I can live with that."

Everyone in attendance is offered time to express personal opinions regarding the owner's direction. This is usually a time of great affirmation. The trusted advisor facilitates this session to ensure that everyone has the same opportunity to speak, no one dominates and the start/stop times are honored.

4. Clear path going forward

The result is a destination, steps and timing to move the transition forward with annual review points. To keep all stakeholders in the loop, many owners continue annual meetings to maintain open and clear channels of communication.

"To gain encouragement and new ideas for each transition step, it's important for owners to meet frequently with other business owners who are further along the transition journey and willing to share their experiences," says Jim Gambone, co-author of "Find What's NEXT For You: Business Owners Share Their Transition Stories."

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