Family Business Succession Planning

Family Business Succession Planning

by Richard C. Wilson & Family Offices Group Association Team

At Divestopedia, we have had the privilege of interviewing some of the best and brightest on the subject of wealth management strategies for owners of family businesses.  Here are some of our favorite pieces of advice from these experts:

Richard C. Wilson, President and Founder of Billionaire Family Office & Single Family Office Syndicate
“It’s definitely bad when kids get access to money too quickly or even know that the family has too much money. I might just get a bit too relaxed and too complacent with the opportunities they have in life. A lot of wealthy families have a next generation of kids who don’t work hard, don’t push themselves, don’t develop themselves and they blow all the money and it’s gone within another generation. That happens all of the time.” Listen to the full podcast here.

Lisa Gray, Founder of Graymatter Strategies LLC
“When you own a business and you’ve created a pocket of wealth, you have become a leader of your family and apprenticing new leaders, the greatest role for that leader that built the wealth is to become an educator and a mentor for those apprentices.  Founders of businesses have spent their entire life working hard to build the business and in these cases it’s been so much more successful possibly than they’ve ever seen and it’s enabled them to do things with their family and have a lifestyle that has just been wonderful. So a wonderful gift to the family and when you go out from having a change in form of the wealth from an offering wealth to liquid wealth. It introduces a lot of concerns, a lot of risks, and in addition to the fact that maybe the wealth is not going to be growing the way it once was in the business.” Listen to the full podcast here.

Warland Griffith, President and CEO of Wealth Management Advisors, Inc.
“I feel very strongly that a child or a family member who is working in the business should actually buy the business in one form or another rather than just have it just gifted to them because the owner is the one who put all of his or her blood, sweat and tears into the business; he’s put everything at risk. This typically is not the case with the son or the daughter who’s working in the business. So they need to really bring that person up to speed with regard to maturity and risk taking, and put them in different roles throughout the company so that they can experience the same thing that the owner or parent has.” Listen to the full podcast here.

James Hughes, Jr., Author of Family Wealth: Keeping It in the Family
“There is this common universal proverb used and spoken in different ways: Shirt sleeves to shirt sleeves in three generations. The first generation has a wealth creation. The second generation changes its value system, changes where it lives, builds big houses, goes on the opera board. The third generation, with no experience of work, dissipates the fortune. The fourth generation in the Chinese idiom goes back in the rice patty.” Listen to the full podcast here.

Tom Deans, Author of Every Family’s Business
“The great dynastic families, the ones who are able to continue their wealth from generation to generation have this uncanny ability to talk openly, frequently and honestly about money. It’s not taboo. It’s culturally a part of their family, it’s like breathing for the uber-wealthy. This is what they do.” Listen to the full podcast here.

Judith Kolva, Founder and CEO of Memoir Shoppe
“Sharing stories can preserve that long and lasting legacy and make it positive. And through the preservation of that human capital that comes out through telling the family’s story, ensures and protects the family from that shirt sleeves to shirt sleeves in three generations syndrome.”  Listen to the full podcast here.

Matt Wesley, The Wesley Group
“Make sure that the family’s discussing the questions that matter, the questions that are really going to be making a difference. One of the key things, if there is a liquidity event, is how should that money, the assets be divided among the children, and a really critical question is how much of that money should be set aside for the family as a whole?

The biggest reason that family businesses fail and that family’s fall apart is the failure of trust, and oftentimes that’s rooted in failures of communication. And so the first skill that a family needs to develop and needs to sustain is that degree of trust.” Listen to the full podcast here.

Peter Christman, CEO and Founder of the Christman Group
“Educate the family as to what’s the process going to be and why the process is in place. Second, use professionals, use your team of estate planners and tax planners to develop tools that will benefit and maximize the value that the owner’s going to get, the value that the kids are going to get and the value that the grandchildren are going to get.” Listen to the full podcast here.

Kaushal Majmudar, Chief Investment Officer at Ridgewood Investments
“The best way to figure out how much people need is really to look back at what they’ve been spending and doing it on a detailed basis each month, looking at your budget over a typical year and projecting that forward.” Listen to the full podcast here.

Mike Michalowicz, CEO of Provendus Group
“You make a nice salary, you have nice distributions, but when you sell the company that is a fat, fat check that’s coming your way. Well, the trap that many entrepreneurs fall into is you see that fat check is coming in, and you emotionally start spending the money before you have it.” Listen to the full podcast here.

Carl Lutz, Lutz & Associates
“I try to get business owners whether they are an individual or have partners to insure they’re income with their family first and then insure the value of the business, but a lot of them get caught in the trap of using the value of the business to replace their income. I want them to recognize that you are then basically liquidating an asset prematurely.” Listen to the full podcast here.

About Jeremy Azzarita
Jeremy AzzaritaIn addition to being a valued contributor at Divestopedia, Jeremy Azzarita is Intern at Clearwater Corporate Finance supporting the M&A advisory team in London.

Prior to joining Clearwater Corporate Finance, Jeremy worked as Analyst intern for IMAP MB Partners, a mid-market corporate finance company, in Budapest, Hungary where he performed valuations in Healthcare and Consumer sectors, contributed to the development of transaction documentations and identified as well as contacted potential investors.

I hope you enjoyed this article on family business succession planning.

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