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Warner Norcross + Judd: Your 7-Step Plan for Creating Chaos in Your Family Business

By Bill Lentine

Most business owners know that proper succession planning can help keep their business running strong into the next generation. They understand the importance of creating a plan to prepare heirs and key employees to run the business when it is time. But sometimes owners are busy and fail to plan for the future of their business in a timely manner.

Executing an unplanned transition when the family business leader becomes incapacitated or passes can be painful for the family (at an already difficult time) and potentially damaging for the business. Families in this situation often engage Warner to help them create a path forward for the business.

We think it makes sense to offer some lessons learned by these families as a resource for current business owners. Instead of offering a typical “best practices” list, we took a different approach. Here are some “worst practices” that will surely wreak chaos in your family business after you pass – from families who have experienced an unplanned business transition

7 Ways to Create Chaos in the Family Business After Your Death

  1. Don’t document your good intentions. Think about succession planning for years, but don’t document any of your thoughts or planning ideas for the family. Or, to make it really interesting, keep jotting down ideas on various notepads, napkins or sticky notes over the years, creating obvious contradictions between the ideas.
  2. Leave business ownership to your family but without a skilled operator in charge of it. This spreads chaos over the widest possible range after your death, affecting family members, employees, customers, suppliers and professional advisors when the battle lines are drawn between children and possibly your spouse as they wrestle for control of the company while dealing with their grief.
  3. Pick one winner. Leave both the business equity and control to one child that seems reasonably responsible and ask them to do the “right” thing for their siblings and remaining parent. For maximum family strife, the “responsible” child should be married to a spouse who is greedy or difficult to deal with.
  4. Don’t do any estate or tax planning. This way your heirs will not only struggle with the above issues but will also inherit a huge tax bill that they were not expecting and will have to cover by taking out loans or by selling the business.
  5. Micro-manage future leaders. Allowing your children or other key employees to manage portions of the business will allow a leader or group of leaders to naturally emerge, whereas micro-managing those heirs and other key employees in their current positions will ensure that they won’t learn how to lead, make decisions or accept responsibility.
  6. Don’t discuss the future of the family business. Avoiding these conversations ensures that you won’t know whether your heirs or current managers actually want to run the business and allows you to create a pressing sense of obligation for the next generation to work in or run the business. Even better, this sense of obligation can create next generation business leaders who are resentful or who lack the passion that you brought to running the business.
  7. Keep your professional advisors under wraps. Failure to introduce your professional team to your children can create havoc for your business because neither of these groups will be prepared to handle the inevitable difficult discussions that ensue during a transition. Plus, your children will not know and may not trust your attorney, CPA, investment advisor or other professional advisors, adding even more obstacles to this transition.

Having No Plan Can Also Cause Chaos in Your Business

Naturally, we wouldn’t expect you to do any of the things on this list on purpose to cause disruption and bad feelings in your family. But sometimes, not planning for the future can have the same impact on your family as if you had intentionally tried to cause chaos, leaving loved ones in a less than desirable position down the road should something happen to you.

Many of the steps involved in successfully transitioning a family business can take years, even decades to complete, so it is better to start planning sooner rather than later.