By: Pat Tabor, Swan Mountain Consulting
Procrastination is a pretty common behavior for closely held business owners. But bar none, in over 30 years with working with family-run businesses, I’ve observed the most commonly avoided issue is dealing with the family dynamic. And as I think back on it, the end result of many owners doing this has led to a lot of strife and too often outright failure of family businesses in particular when it comes to succession.
why is it so common?
The quick answer is folks just don’t like conflicting with the emotional issues surrounding having family and business issues mixed together. When we have behavioral issues with employees that aren’t family, we can seemingly deal with it expeditiously. This occurs partly because we can separate business from relationships and “do what’s right” for the business. But with a family business, doing what’s right could be precisely wrong for the health of the family, or so it seems, so best to leave it alone. The fact is it is quite rare that working with family is void of emotional dynamics that often began in childhood. The intertwining of these unresolved family issues coupled with the intricacies of running a small business make for almost instant conflict. But since the underlying emotional issues weren’t ever dealt with initially, they have a tendency to grow and fester over time only making resolution all the more elusive. So what do most owners or founders do? Kick the can down the road!
If this sounds familiar, you are not alone. Nationally, the Family Business Planning Institute estimates that over 80% of family owned businesses have not developed a comprehensive succession plan. And if a plan has been designed, an astounding 90% of them lack the rigor and truthfulness in identifying the shortcomings and inadequacies of candidates for succession. The end result of this is the “clunky” implementation of a plan and continued involvement of the succeeded generation long after they should have been out.
Navigating the Future
So, what should outdoor recreation businesses facing these issues do? To borrow a term being utilized frequently in counseling, therapy and leadership development, “Lean into It!” The situation will just not correct itself with time so until a commitment to face the truth head on and do something proactively about it is made nothing will change. Perhaps the most poignant analogy is the treatment of an addiction. Until an addict admits there is a problem and seeks help, recovery will never occur. So too, families have to truthfully assess their situation, admit to what isn’t working, and “lean into’ the discomfort of effectuating the changes needed.
I get it, this isn’t easy, I just experienced handing my recreation businesses down to my adult children. I’d be outright lying if I stated this occurred like clockwork without significant emotional setbacks and unforeseen obstacles. The good news for us is we could see it in the making and have spent substantial amounts of time dialoguing about how to get through it. As a business owner and a father, I underestimated the emotions in myself going through the transition. Once I embraced this and really started focusing on the impact, we as a family were able to breakthrough and get our plan on track.
So having lived through it and assisting many clients as well, here are my recommendations in creating a sound succession plan:
Work with a transition planning specialist to develop a comprehensive transition plan 5 years in advance of a planned succession/transition
Put a designated successor leader into a leadership development/executive coaching program
Seek the assistance of a family business psychologist
Work with an advanced financial planner/CPA on the technical mechanisms of:
Estate and gift tax
Capital gain/ordinary income payout schemes
Cash needs post retirement
Company cash flow projections
Consider the addition of outside Board members or Advisory Board
Create Family Operating Agreements
Schedule and structure Family meetings
Embracing the above work plan isn’t a guaranteed without the commitment to “lean into” the emotional piece of it, but it will go a long way to helping your family beat the succession success odds.
About the Author:
Pat Tabor is the founder and Managing Partner of Swan Mountain Consulting Group. The firm specializes in providing high level consulting services to the outdoor recreation industry utilizing consultants that have “been there, done that”.