Talking to your family about exiting your business

Does this sound familiar to you at all?

The whole succession plan is in mom and dad’s head, and they’ve never communicated it to the kids. 

They just assume, being parents, that they know what’s best for their kids, right?

And most of the time they mean well. But the plan lives in their head and nowhere else.

That’s a problem, because the numbers on family business succession are not great. Passing a business to the second generation is often difficult, and sustaining it beyond that can be even more challenging. 

So of all the planning that we do, the parts that usually take the longest are having the parents talk to the children. That’s why communication is key well in advance. Not the year you want to exit, but far in advance.

But bringing it up with your family can feel really tough. 

You sit down thinking everybody’s on the same page, and what you find out is that their thought process on when mom and dad decide to retire is totally opposite. 

Polar opposites, even.

And that doesn’t go well.

And it’s a lot easier said than done to communicate with your kids about the business.

How do you even know it’s time?

I always start in the same place: What makes you feel that you want to, or are ready to, exit the business?

What changed in your life that, instead of working on the business or in the business the whole time, now you’re ready to exit?

Do you see your competitors doing that? Is it that you’re wanting to slow down because of health, or simply changed goals for your future?

Whichever it is, the timing tends to be the same. In an ideal world, this comes up around three years before you think you want to exit.

I say three years because these are hard decisions, and there’s a lot that has to be addressed depending on whether the business is actually ready to transition to the next generation or to sell.

How we actually bring it up

When it’s time to have the conversation, it usually goes back to the good old whiteboard. 

Let’s throw all of your assets up there. Let’s throw all your family members up there. And you tell me your dream scenario.

Then we walk it through.

The conversation opens up when we talk about when mom and dad aren’t here. When those discussions go fairly smoothly, we go through each child or grandchild and lay it out, and you look at it and say, yeah, this is good.

That’s the importance of having these conversations, and getting people thinking through two to three levels deep about what can happen with your money.

And every family is different. So, in the estate plan, we address each one of those situations. That’s where a lot of trust planning comes into play, and protection issues for their assets and money.

What might surprise you

Most of the time, once we whiteboard it and take you through it, and once we get through the first or second session, it all runs pretty smoothly. 

The worry is almost always bigger than the conversation itself. But it gets a lot easier the earlier you start.

If any of this sounds like your family, like the plan that only lives in your head, the kids who might be on a totally different page, the exit that’s three years out whether you’ve planned for it or not… this is exactly the kind of thing we’d rather talk through now than clean up later.

I’d rather be proactive with you than reactive.

So let’s get it up on the whiteboard.

Reach out and let’s have this conversation while there’s still plenty of runway to do it right.

-Michael

Book a JobWalk with me and we can start the conversation.

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HFM Investment Advisors, LLC is a registered investment adviser. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. All investments involve risk and are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as a recommendation appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment advisor to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.