How to Start Having Important Family Business Conversations
Author: Josh Huseman, Vice President, Business Owner Advisory Services
In the fable “The Inquisitive Man,” a person describes his recent museum trip to a friend. Detailing the “palace of wonders,” the man describes his amazement at what he saw, including details of the tiniest birds, bees and insects. However, he is surprised when asked what he thought of the elephant – to which he responded, “I didn’t notice the elephant.”
This fable is believed to have led to the popular idiom: the elephant in the room. In some cases, that may be an accurate description of the typical approach to succession planning. Advisors and families find it can be easy to focus on the intricate, technical details that help avoid taxes and mitigate risk, but in many cases, we find family communication to be an elephant that is often missed – or perhaps assumed to be adequate.
Unfortunately, avoiding the elephant of family business conversations could disrupt your life’s work and place a heavy burden upon your family should the unthinkable happen. At a time when a spouse, children and coworkers are dealing with grief and loss, they must also make critical business decisions without a road map to guide them.
One reason owners put off succession planning is simply the time and energy it takes to run a business. A recent survey of business owners found that 68% of their time is spent handling daily operations. Farmers, who continue to face workforce shortages, are also embroiled in operational tasks from sunup to sundown. “I don’t have enough time” is a common refrain we hear from farmers, and we understand this is a problem.
Yet another problem is that there is also too much time. Family business conversations about tomorrow’s issues are usually things we can delay, so we wait until it becomes unavoidable. And further, there are real emotional factors that come into play when having conversations about death, transitioning a farm and addressing “off farm” family members. Owners may worry they will upset some family members by bringing up difficult subjects or disrupt family harmony with conversations about succession. So, sometimes, these things seem best left alone.
One way to begin family business conversations about planning without introducing much conflict is to start with determining who you are as a family and what values you embrace.
Addressing the Elephant
Discussing what values define your family and business operation is the first conversation to have when considering a succession plan. To understand this better, take a look at the word “family.” It’s a moniker that means different things to different families.
If you own an agricultural operation, family may mean togetherness, as you work side by side to run the farm. Other business owners may expand their definition to include close friends and key personnel. Defining the unique and specific values that have meaning to your family will provide the foundation for all other succession planning decisions as you move forward.
One way to get started is to write a “we value, so we can do something” statement. Using the family example we just discussed, this statement could be completed as “we value family, so we make decisions that preserve our time spent together.” If a family expands their definition of the value to include other associations or benefits, they can clearly articulate the behaviors that describe their specific interpretation of the word. With such a value statement in place, future decisions can be connected to family togetherness – perhaps even giving permission to say “no” to opportunities that would sacrifice time away from the family.
If the “elephant” we’re identifying is family communication around succession planning, beginning with your family’s core values is a great place from which to source your decisions. Shared values give context to the intent and meaning of succession plans, which is far more valuable than the technical and financial elements of your planning.
Putting Your Values to Work in Succession Planning
Translating your family values into succession planning is easier once you define those core, meaningful elements. Having these values in place also makes it easier to discuss the key issues that many business owners find difficult to broach, such as:
- Qualifications to be an owner of the farm operation, business and/or property.
- What if there is a falling out with a family member or spouse, such as divorce? How will their share of the business be handled?
- What if someone changes their mind about their involvement with the business or their role in the farm?
- What if nobody wants to take over?
- What if someone is holding on too long, avoiding making decisions?
While answering questions like these are critical, the discussions necessary to determine the answers aren’t always comfortable. It’s important to allow all participants a chance to contribute and to connect your discussions back to your core values. Doing so makes it easier to make decisions without hurting feelings as every outcome must eventually support the values your family has chosen to uphold. Also, allow for emerging interpretations of your values as younger generations come of age and bring their perspectives.
Family communication is a muscle that needs to be developed over time. When exercised regularly, your ability to communicate well about difficult topics will show up when you most need it. The good news is that you can start with just one conversation and use it to build out your plan over time. If you are intimidated and need some help getting started, reach out to our team, and we would be happy to help you.
About the Author
Josh is the Vice President of Business Owner Advisory Services. Josh is motivated by a strong desire to see business owners impact the world through their core values and entrepreneurial spirit. He is particularly intrigued by the unique opportunities and challenges that come with family-owned businesses, and he works hard to help them realize their full potential.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.