Southeast Michigan Contractors Issue 3 2023 19 EQUAL FAMILY BUSINESS OWNERSHIP Let’s face it, the transition of your business to the next generation cannot happen overnight. An estate plan, buysell agreements and stock certificates are not going to address all the family and business issues. It takes time and resources to create a well thought out exit plan that considers all aspects of your family and your business. An owner that is considering an exit within the next 3–5 years should start planning right now. Family transitions typically involve emotional and uncomfortable conversations. The kind of conversations that are typically avoided within families. Congratulations, you have decided to start planning the transition of your business to the next generation. But are you planning to give each child an equal percentage whether involved in the business or not? As owners (and parents) do you think you are doing what’s best for the family? Is it what is best for the business? Sometimes what seems equal is not fair. However, allowing yourself the time to work through these without the added pressures of short deadlines will help ensure the decisions made enable family harmony to continue and the business to prosper. It is extremely common, unfortunately, that business owners who want to pass their business to one or more of their children fail to develop a plan. More often, business owners try to develop a plan without first dealing with some of the difficult factors of a family business— the people, including both family members and employees. Also, owners fail to recognize that they are simply not ready to relinquish their ownership, control or involvement in the business, especially for those whose identity is tied to the business. The decisions and conversations that the senior, controlling owners have now, will help the next generation of family members understand why decisions were made and how to move into the future together. Thus, avoiding conflicts that typically arise when the senior family member(s) is no longer in control. When considering the overall exit strategy, it is important to consider and address options for family members that want or need to get out of the business. The reasons are unlimited, but the issue tends to revolve around money and their need for that money sooner rather than later. It could be an owner that needs to exit due to a divorce or an owner who wants to pursue another opportunity. When it comes to the next generation, owners often avoid or delay conversations to maintain control. Worst case scenario, the owners have avoided asking even the most basic questions about the business, such as: Do they want to be a part of the business? Do they want to work at the business? Do you want to be an owner? Not asking these questions can cause missed opportunities, lack of personal planning, or misunderstanding of what is expected within the business. It is important to have these conversations with all members of the family to have a clear understanding of the decisions and how it will affect all parties, especially those involved in the future operation of the business. Once these conversations are had with the family members, the owner can decide whether to bring in a family member or to promote a family member and how it may affect the other family members, employees and the business. The owner will need to answer many questions: Is the family member right for the job? How well does this family member know the employees and the business? Do they get it, want it and have the capacity to successfully run the business? How prepared is the family
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