Southeast Michigan Contractors Issue 3 2023 21 EQUAL FAMILY BUSINESS OWNERSHIP likely to be in the future of the business. Thus, the owner should consider how the new ownership structure will affect the employees, and how the employee will react to the decisions. As the current owner, your employees are loyal, have worked alongside you and may even feel proud to work for the business because they attribute the business culture to you. Will employees have that same pride and loyalty with the next generation? Will they be proud to continue to work with and for those family members? Whether you as the owner want to confront these questions or not, the truth is, your employees are talking about it. Employees tend to believe there is a lack of leadership when owners are afraid to confront these issues. In the event owners make decisions without considering these issues, the employees may fear the future of the business and jump ship. Owners that have trouble retaining their key employees will generally lose the rest of the quality workforce. Now, the future of the business, its ability to take on work, make profits—is no longer looking good for anyone. Not for the exiting ownership, family members involved or not, and definitely not for the employees and family. Without the future profits of the business, the exiting owner’s goals will not likely be met. This will directly affect the owner’s retirement plans, maintaining current lifestyle, inheritance goals for both family members involved in the business and not, and the plans for the family’s future. So, before deciding to promote junior and/or transfer equal shares to all children (involved or not), deal with these questions. Otherwise, you may be asking yourself: “did my intent of being fair to the family, giving each child equal shares or promoting a family member, actually diminish the future value for everyone? Or even worse, will the business be able to survive?” The more owners the more likely different personalities, different opinions on what the business should be doing, where the business should go, how the business should operate and how much to distribute to ownerships. What about whether the family members get along or will in their future roles? What about how a child spending sleepless nights running the business may feel about sending distribution checks to family members not involved in the business (and likely these family members have little understanding of what the business does, its products/services, customers, employees, etc.). This presents many struggles for the family members that will continue to operate the business. Will resentment grow? Will the operating family member be able to manage all the personalities of the next generation? Is that what is best for the business? For the future of your legacy? The family members become even further disconnected from what is going on, where the business is going, or what the business needs. Yet, this does not mean these family members will not have an opinion. What made the family business so successful when the business first began was usually an all-hands-on deck philosophy. Everyone working for the same goal with the same vision. Yet, when the next generation comes of age, they may have different beliefs, passions or career goals. Most owners want to provide this option to their children, so why would you keep family members that are disconnected from the business as owners, potential leaders, and allow them to have a say on what the future of the business should be. This puts more pressure on the new family members coming into ownership to manage the whole family and that as President or CEO you are also responsible for ensuring the whole family harmony. This is business. Its purpose is to do what you love and make money doing it. Transferring equal shares to your children just because they are your children is not fair to the business. It is not fair to the family members that will continue to operate the business. It is not fair to your employees. Doing this will likely diminish the strength and growth of your business—and your legacy. In sum, the business has been your life’s work. And your work has been and will be a part of your family. A family legacy. Don’t you want to ensure it survives? To ensure family harmony for your retirement and the next generation. It is important to consider the effects these decisions will have on the business, your employees and other family members whether involved or not. It’s time to have the conversations and be realistic. Stop avoiding them. Take control of your future and start planning for yourself, the future of your family and the business.
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