Legacy Matters: Turn Your Family Business into Generational Wealth

Family-owned companies are important to the overall economy and the fabric of the global business landscape. But it is not always easy to sustain their success spanning generations. Most businesses do not even reach the second generation, and even fewer make it to the third. However, well-run family companies tend to be more profitable and stay in business longer than other privately owned companies.

As a business owner, you may be wondering, “Will the legacy of my business last, and how long? How can I help ensure its future?” While you do not want to be responsible for still running the day-to-day operations of your company well into your golden years, you do want to feel confident that your life’s achievements will be sustained into the future in the hands of your offspring, and you want to make sure that they are set up for their own success and prosperity, with the same going for their children as well.

It’s Never Too Soon to Have a Plan

So, how do we make it so that they are set up to succeed? First of all, you simply cannot start planning for the future too soon. The earlier you have a solid plan in place, the better. This plan should be designed to cultivate the next generation in a way that helps them understand what needs to be done and how, in a way that is proactive in deterring problems and better ensures an enduring legacy.

Good leadership and smart investment decisions are certainly the bedrock of a business’s future legacy. But you absolutely must have a well-developed plan in place. This plan should outline your financial goals and values, along with having a diverse investment portfolio that supports your long-term objectives. The plan should also include strategies for protecting your assets, planning for tax matters, and a timeline for making sure you’re on pace to achieve your goals. Adjust your plan accordingly based on changing market or family dynamics, ensuring that the plan is always up to date.

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Succession Planning is Critical

Your next-generation plan will also need to include a succession plan. Determine who is in line to take the reins, and how any other family members will be involved. You will also need to be prepared for the possibility that no one wants to assume control of the family business. Consider how ownership stakes and payouts may need to be arranged. This can be a delicate and touchy subject, but it needs to be carefully managed so that everyone is crystal clear on what the plan for the future entails and the role that they are expected to play in it. The sooner you define these roles, the better.

You can build your family legacy plan by encouraging and maintaining open communication across all family members involved in the company. Business continuity starts with making sure everyone understands your values, expectations, and long-term vision for the future.

You will also need to make sure that the next generation is adequately prepared to step up when the time comes. Have them by your side, teaching them about leadership, tradition, best practices, and innovation. Get them ready to navigate challenges that the future may hold, and make sure that they learn how to be confident in their decision-making capabilities. Those who lack confidence in their abilities are more likely to make poor choices or just become frozen with an inability to act.

If your family dynamic includes disagreements about the future of the company, you may want to consider enlisting professional conflict mediators to foster impartial discussions to resolve disputes, getting the family aligned on value, priorities, and future objectives. If more than one of your children feels that they should be the one taking over, there could be animosity and an unhealthy situation. There could be ways to lay out a plan for a healthy competition between them to determine who ultimately takes the helm, with clear benchmarks for success.

Protect and Maximize the Legacy you’ve Built

Estate Planning is Just as Important

You should also make sure to create a will to ensure that your wishes are clear to your trustees. Estate planning is a crucial tool in creating and protecting generational wealth. Wills and trusts enable the smooth transferring of assets, minimize tax implications, and limit potential conflicts. Trusts can be particularly valuable for families that have many assets or complicated situations. A trust allows you to stipulate your inheritance, protect your assets, and keep future generations on the right track. Always keep in mind that succession planning is an absolutely critical part of your estate plan.

The reality is that the future is unpredictable. Having a documented succession plan in place protects the fate of your business, helping you to be prepared for any challenge or opportunity that may come along. Sadly, many family-owned businesses fail when the owner dies.

It is also important that you don’t make assumptions regarding who will be taking over your business. Talk with your family members. Make sure they are even interested in the job. If indeed they are interested, do they have what it takes to run the business effectively? By starting to plan your succession now, you will have more time to help them be properly prepared to assume control when the time comes.

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