A clear set of guiding principles outlining the way in which wealth will be dealt with in your family will bring clarity, better communication, reduced conflict and, in fact, will produce a growth in your family wealth.
Active Knowledge Question:
Does everyone in your immediate family have a clear understanding on how you will approach succession, and, when the time comes, allocate your wealth?
Conflicts often arise from uncertainty and lack of communication. And when it comes to family business succession, there is often less communication around critical and sensitive issues than is necessary.
It’s the elephant in the room that no one wants to talk about, otherwise, they will appear to be disrespectful, money hungry and talking about the unspeakable; death. As to those whose wealth is being ‘discussed’, the parents, they either don’t think it’s an issue to be discussed or don’t want to take a position on it. Whatever the reasons, it can very quickly become unhealthy if it’s not discussed, and, from a business perspective, just leads to poor planning and outcomes.
It can be challenging to settle on a set of wealth allocation principles, depending on the complexity of your structures, family dynamics, and where the sense of equity has been built up across the family members. But it is necessary and better done sooner, than later.
Next week I will start providing a series of questions that will support you to work through the various succession issues outlined above. But, to start, here is a sample set of principles to consider that will provide a sense of what you are moving towards:
- All children should receive an ‘equal’ share.
- ‘Equal’ means fair, not the exact same dollar amount.
- Keep wealth in the ‘family’ – that means no spouses and pre-nuptial agreements.
- Where possible, business assets should go to family members working in the businesses.
- Develop a robust governance process and family charter to reduce conflict.
- Involve the children in the management of the business now to gain experience.
- Transfer ownership of the business only upon death so as to retain ultimate control of it.
- Ensure we separate out and make adequate financial provision for ourselves.
A tailored set of wealth allocation principles for your family will provide certainty and allow everyone in the family to focus on their individual lives, and to build the family wealth.
An entirely new level of performance.
Want to become a part of the Entrepreneurs+ Community and learn how to make your business Competitively Fit? Join Now.
All the best in the success of your business,
Richard Shrapnel
