Familosophy v6#3 - March 2023
David Werdiger
Antifragile your Family Enterprise | Release “The Sticky Baton” | Wealth as Wellness | Best-selling Author | Elite Candy Crusher
Transition Ready
In the early days of my billing business, a prospective customer asked me: "what if I was hit by a bus?" This highlighted to me the dependence of the business on me, and I set about making the business "sale-ready". That didn't mean that I planned to sell it, rather that if I ever wanted to, I could, because the business would be worth as much without me as with me. That is my definition of a true asset.
People have been talking about "the great wealth transition" for a long time, and for various reasons, these transitions are taking longer than expected. But not matter when the transition will actually happen, it is in the interests of a family to become "transition ready". That means (a) the incumbent generation have clarity about what life looks like for them if and when they choose to retire, (b) the rising generation are ready, willing and able to step into positions of control within the family enterprise, and (c) the operating and non-operating assets of the family are well-governed and managed, and therefore the family has optionality regarding their future disposition.
Being "transition ready" is a lot more than having a will and an estate plan with a lawyer. It needs communication across the family, and shared vision for the future. Thinking and talking about our mortality and plans for the future can be very confronting. Not talking about it leads to fragile family systems that can easily fall into conflict.
Consider This:?How "transition-ready" is your family? How might you measure that readiness for yourself, your children, and your assets?
Further reading:?https://www.forbes.com/sites/insights-northwestern-mutual/2022/12/06/5-steps-for-starting-a-legacy-conversation-with-your-family/?sh=f72b41c57aab,?https://www.advisorhub.com/resources/failed-succession-plans-the-8-lessons-they-teach/,?https://www.natlawreview.com/article/5-questions-you-should-be-asking-about-succession-planning-your-family-office,?https://www.bizjournals.com/dayton/news/2021/04/07/preparing-for-what-s-next-after-the-sale.html,?https://www.forbes.com/sites/forbesbusinesscouncil/2020/08/25/creating-momentum-in-your-succession-planning-process/#683513481b88,?https://www.thestar.com.my/business/business-news/2019/03/16/family-businesses-in-msia-lack-succession-planning/
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Carrot, Stick, or ...?
Q. My child is not performing in their role in the family business / will use their inheritance to support a cause I despise / wants to take over / doesn't want to take over / doesn't want to do what I want. What can I do to bring them into line?
A. Since time immemorial, parents have been trying to get their children to do what they want, or follow in their footsteps. Which specific method to use is often a function of the age of a child. When they are young, we can tell them what to do and they might listen. But as they move into their teens, this becomes more difficult. Indeed, during a rebellious period (which some children never outgrow), they are inclined to do the opposite of what parents want.
The 'stick' works, but only for a very limited time. Using the stick (e.g. threatening to cut them out of an inheritance or other coercive tactics) on an adult is fraught with danger. While it may achieve the desired short-term result, the collateral relationship damage may be permanent. On the other hand, the 'carrot' can be akin to bribery, and also can send the wrong message to children about what is important.
It's worth looking outside the box at interest-based negotiation, and even acknowledging that your children are adults who may not make the same life choices as you! These may not result in getting the children to do what you want, but may well result in a healthy and positive family relationship.
Consider This:?(for parents)?How has the way you try to get children to do what you want changed as they have grown up? (for children) how does the way your parents seek to get you to do their wishes make you feel?
Shareholder at Babst, Calland, Clements & Zomnir, P.C.
1 年David-- very well said. Succinct and "spot on" summary of how to best approach inevitable transitional issues that can be difficult for both generations.