Many families do a poor job of teaching their children about money and wealth. For the future of a family business, this can be devastating.

Money and wealth are not the same. Money is a medium of exchange. It’s about transactions, and is used for taking care of our needs. Wealth, on the other hand, is the net accumulation or abundance of assets. In some ways, money is about today, and wealth is about the future. Understanding both enables successful multi-generational sustainability.

It is important to help your children understand this distinction so they can develop attitudes toward money and their family’s wealth that are realistic and constructive.

The charismatic, know-what-to-do leader of a first generation family business may not be available, or be what’s needed in subsequent generations.

Leadership comes in different styles and strengths. Derek Jeter’s leadership of the NY Yankees differed in style from former Mayor Michael Bloomberg’s leadership of New York City. Both were winners.

The challenge of a first-generation leader is to recognize different leadership styles in the next generation, and what the business as well as the family will need going forward.

Seth Godin said it again–that ‘no plan’ is a plan, but one with little chance of turning out the way you want it to. It’s especially true for family businesses. http://sethgodin.typepad.com/seths_blog/2014/12/backing-into-your-future.html

Whether in a closely held business or a family business, lack of a transition or succession plan, or a buy-sell agreement, is a recipe for loss of an inheritance, a business and possibly a family as well.

Family businesses have an enduring advantage over all other kinds of enterprises, in large part because of their long-term goals, plans and commitments.

It’s the role of the current heads of family businesses to develop future family leadership, equity owners and business management that will enable their businesses to survive and thrive through generations to come. Without their leadership it will be impossible for their businesses to avoid becoming an example of the statistic that says that most family business fail by their third generation.

It is possible to be a leader in a family business and not wear the mantle of CEO. At times this is preferable.

The architect of  succession in a family business has to be the incumbent, the current head of the business. It won’t work any other way.

• Well educated and with a great living standard. Working in the family business. Making a living from the company’s profits; living from the income generated by the previous generation. The firm operates on automatic pilot; nothing is new since the founder created it.
• Don’t work in the family business or have no interest in it, but live from the firm’s profits. A firm with this successor mentality is poised for a slow process of decay. It is trapped in a vicious cycle based on an extractive model of wealth–a sure breeding ground for future family conflicts. It is difficult to break out from this specific firm/family-dynamic routine. However, there’s a possibility in the near future that one of the grandchildren may breath new life into the firm with breakthrough ideas and enthusiasm for taking risks and seizing opportunities.

Harsh perspectives? Perhaps, but true and all too common.

Alternatively….

• You have succeeded to the leadership of an enterprising family. Each generation has managed to re-create the company, re-invent it. Each has changed the direction of the company, opening up new and different terrain. Each has discovered and taken advantage of opportunities while using the resources, abilities and know-how from previous generations. The entrepreneurial genetic code of the firm is its hallmark. Each successor has challenged the status quo that sprang from the success of the previous generations, setting a fresh course with new leadership, new goals and new ambitions.

If yours is not an enterprising family, make the commitment to change the situation.

Hearing “I need to …, ” I wonder if the speaker means “I want to,” or if they are speaking in terms of a life-necessary action as in stating “I need to eat.”

The problem is that “I need to” is often based in the unrecognized interests of another, or of all of society, at the expense of our own. In this context it presents a weak, non-committal position that belies our actual goal. It often acts as a screen to hide the fact that we actually don’t want the expressed outcome. A client, expressing something he had been “needing to” for a long time, after considering the source of the felt need came to the realization that he never “wanted to.”

For me, the statement “I need to give my son or daughter more autonomy in the business,” begs the question “why do you need to?” What is the outcome you want? Is it to satisfy a subtle society pressure, or do you see a benefit for yourself, your children, or the business in doing so?

Clarity is a powerful facilitator for reaching goals. If you really don’t want to do something, you are wasting your time and that of others by pursuing it. The hard part about life is that this happens, without our quite realizing it, and it sometimes takes harsh medicine to break the momentum and turn us around.

If you have been voicing “need” to turn over responsibilities in your business to your children while not doing it, you are lying to yourself.

Most family businesses succumb to either being sold to non-family entities, or to closing their doors with the third generation. While this may be lamented, it is, at times, the best strategy for stewarding wealth across generations.

Preparing next-generation minds for leadership and innovation is a critical role of family business. Accomplishing these goals and yet selling the business, is a win.