When it comes to succession planning, many advisors think that their main worries will be the financial and legal aspects of business transfers. But if they are keeping the business within the family, emotional issues often come into play.
If an entrepreneur has not chosen a successor, he or she may be reluctant to broach this delicate subject. Many times his worst fear is to appear to be favoring one child over another. To get around this impasse, financial advisors must tackle these concerns head-on. They play a crucial role in easing the succession crisis that is afflicting Canadian SMEs.
Among the specialists who proposed solutions at the Insurance and Investment Convention this past November in Montreal, Louis Dumont, a financial planner and business coach, said certain myths need to be addressed when planning for succession.
Shatter the myths
The first step: shatter the myths. Myth number one is the irrevocable break. “Succession is not the end for the owner, but rather the start of continuity,” he explains.
Titles is another paper tiger. There’s no rush to choose which of two successor children will be president, Mr. Dumont adds. “The title is not important. Change the titles. Who is president will stop being an issue and you can reduce the risk of the children squabbling,” he says.
The myth that emotion has no place at work is one of the hardest to dispel. People tend to tiptoe around inflammatory topics. This attitude can be pernicious. Such taboos can stall the succession process, Mr. Dumont says. He gave the example of unpaid compliments and unresolved irritants.
Company owners must be receptive to delicate topics and clear the air. “It’s OK to talk about emotions and taboos. For example, if his son regularly arrives late because of alcohol abuse, you have to talk about it. It’s liberating. When you discuss these things, the situation always ends up working out,” Mr. Dumont.
Succession also has its stumbling blocks. “When successors express themselves freely, you often hear things like ‘My father always wants to have his way’ or ‘No matter what I do, he is never happy’,” Mr. Dumont says. The younger generation complains about issues that are swept under the rug. “Power plays are kept in the shadows, and the family’s emotional baggage is not resolved. Often exchanges revolve around money.”
His advice to advisors: “Do not tackle questions about money before you have taken care of the emotional issues. Each succession process comes with heavy emotional baggage. If it is not settled, the parent leaves and the company crumbles.”
He urges entrepreneurs to respect the family successor. “Don’t harbor false illusions about your successors. You think your child does not want to make sacrifices? Maybe they just don’t want to have to divorce their family,” he explains.
Naturally, successors don’t want to be ordered around. “They want to learn from their mistakes and failures, just like their predecessor did,” he continues.
Controlling entrepreneurs should consider giving the adult child a more important role. If they don’t understand something, more information should be exchanged. “Include children in the discussions, even if they are not working for the company. This brings everyone closer together,” Mr. Dumont says.
The entrepreneurs are the ones with the power to move things along. They are the spark plug, Mr. Dumont explains. “Keep in mind that children taking over a family business want to flourish. Look for a solution that’s fair for everyone. The children want roles and responsibilities, not just tasks. Reach out to the succession by soliciting their opinions, without judging them. Admit that you don’t know everything,” he says.