Finding the right exit: Why families have to talk
In the first of our series looking at exiting a business we examine the family complications that might arise and how best to avoid them
You’ve spent time and energy building up your business but what happens when it’s time to take your leave. How do you clear a clear path towards the exit and make sure it is the right journey for you and those around you?
This can be a life-changing event for you and your family, so it is vital to get both the exit and what life will look like once you’ve gone through the door right.
The situations vary enormously depending upon the business types and sectors, individuals’ requirements and positions, and the dynamics of family and other relationships.
But the two main themes which run through the whole process remain constant: Plan in advance and communicate with each other.
In some family businesses, the actual legal ownership is almost irrelevant as the current legal owners almost see themselves as merely the current custodians of a family business that has been passed through the generations and the future owners understand that they are the likely heirs to the legacy.
However, there will be other cases where the current owners need to exploit the full value of their business to maximise their own retirement position.
Typically, it is a combination of the two whereby parents will want to bolster their retirement savings to a satisfactory point but also give their children a good start in running the business without being overburdened financially from the start.
There are a number of problems that can arise because of misunderstandings that develop over a number of years.
A typical case would be when the second, or even third or further generations, have worked in the business for years, and in their mind, they have earned the right to inherit the business, or at least acquire it on favourable terms.
If this is not appreciated by the current owners, or something changes such that expectations of the two generations are out of sync, then there may be conflict, difficult negotiations, and potential family fall out.
The key is clearly communication, and my advice is the sooner and more open those conversations are, the better for everyone.
Family dynamics will usually pre-date the communication style assumed within the business environment so the way in which the family relate to each other in the business is at the heart of these issues and should be addressed before new generations even enter the business.
If there are differences in expectations between parents and children, it becomes even more complex when third generation businesses are liaising with uncles, aunties, and cousins rather than just parents and siblings. Throw spouses in the mix and it is easy to see how expectations may vary.
Again, communication is key.
• To discuss any issues raised in this article please contact me on 01772 430000
