The time for transition in your family business is approaching. Succession is at hand, and the new generation is poised to take the reins…

If you are anything like me, you will have thoughts, and even concerns, about what your life will be like after you relinquish control of your business and begin the process of a personal transition. You may find yourself asking “What’s next?” What role will I play going forward?”

While most of us will have many productive years following transition, for many there will be a strong sense of loss. At times we may find ourselves facing a kind of vacuum as we come to realize what we don’t have anymore.

From person to person, responses to this crisis differ. Some lament this changed relationship, expressed in statements like “it’s hard getting older.” Others embrace a more positive outlook, variously regarding “getting older” as a curiosity, an awe-inspiring process, a new challenge.

In a recent OpEd article for the New York Times, Oliver Sachs wrote about his diagnosis of terminal cancer and his perspective on the future, stating that he now wanted to live in the richest, deepest, most productive way he can. (http://www.nytimes.com/2015/02/19/opinion/oliver-sacks-on-learning-he-has-terminal-cancer.html)

Perhaps akin to being at the top of a roller coaster or setting off on a downhill ski run, letting go is difficult. Certainly there are things I have enjoyed that I can’t do anymore, but this fact does not take anything important away from who I am now.

The ending of years of leadership in the family business is also a new beginning. It is a different beginning than that of youth, and daunting in different ways. But seen in a truly justifiable positive light, this start holds an earned advantage–a worldview and wisdom gained from experience; an equanimity and balance achieved by facing both triumph and disaster and coming through. Many traditional cultures have respected and asked guidance of their elders for just these reasons.

Given the know-how and inner solidity acquired over years of effort, the personal transition of building a newly significant life as an “elder” can perhaps be seen as a truly worthy challenge.

Talking About the Family in the Context of the Family Business but Not About the Business

The dining room table in my childhood home was the place for family meetings. That’s where I learned some of “what it means” to have your own business. Undertaken in a more structured way, family meetings are the place where policies get established. It’s where family members learn about the rights and responsibilities that accompany being a business owner and part of a family business. As family businesses develop, family meetings provide the forum for delivering information to stakeholders, whether working in the family business or not, about the state of the business, its financial performance and plans for future growth.

A well-structured family meeting is worth its weight in gold; done poorly it turns to lead.

According to business exit strategist Andrew Karlen http://www.karlenstolzar.com/karlen.html, business valuation is an important place to start when thinking about transition in family business.

Passing a family business from one generation to the next, rather than through sale to a third-party does not diminish the benefit of or need for a comprehensive valuation.

Not all businesses take steps to get this done. But there are critical consequences for avoiding this important work.

A determination of value:

• Establishes your starting line and distance to the finish
• Tests your exit objectives
• Gives owners a litmus test

When you know how much value there is, you know how much you need to create to achieve your objectives. You then know where you need to concentrate your time and effort

In his white paper, Opening Pandora’s Box–10 Rules for Talking to Kids About Money, Glen Kurlander, Managing Director of Wealth Management at Morgan Stanley, advises affluent parents: “you have got to come to grips with your own values about wealth before you discuss money and wealth with your kids.

https://www.morganstanley.com/wealth/wealthplanning/pdfs/talktokidsaboutmoney.pdf

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.