For many family business owners the pathway to success has been a very purposefully driven process. Key targets have been set, goals have been identified and actions have been carried out to achieve a degree of success.
For many, the success of the family business has generated in wealth for the family. However, the difference between identifying a purposefully generated family wealth and the purpose of the family wealth is a significant one.
Initially, financial wealth is generated to achieve our physiological needs – food, medical care and housing. We then focus on making the wealth secure and safe and extending that safety to our loved ones.
For many families in business who have generated great wealth, the purpose of the wealth has grown beyond simply making the next generation safe and secure. The purpose might be to create employment in the region, contribute to our community or religion, provide employment opportunities to the business employees or gain public recognition.
The decision to pass on this wealth, beyond our basic needs, creates difficult conversations. This is typically because these higher need causes of wealth can vary so much from family to family. A family business will often be part of the fabric of the family and how it is treated later will create a lot of concern among the family.
The complexity of these questions is because they are not simply taxation, financial or property related. It means that the values a family holds dear are held to the light and how the family interprets those values across generations.
Simply put – the succession of a family business goes beyond a will, an enduring power of attorney and some SMSF documentation. The succession goes to how people will react and deal with the succession of the family business wealth so that the succession goes as intended.
At Westcourt we often start with a few simple questions that can become quite difficult:
The process of starting this discussion is difficult and the conversation rarely starts with a large single meeting where the family head stamps the answer among adult children.
Often the process starts with a personal discussion at an individual level to understand the needs and drivers of each “subfamily” member. The sensitive collation and gradual build of discussions over time allow an accumulation of knowledge so that the conversation can start.
The conversation can often start in a transactional way, like discussing financial and tax records, and then build into a discussion about the factors mentioned above. Often the subject of transitioning, control and money go hand in hand. Some simple solutions are just not plausible because of the large tax liabilities that go hand in hand with the simple solution.
What is critical is that family business succession must be done with a range of family business advisors across legal, taxation and banking backgrounds to discuss options. A good starting point is to go to Family Business Australia and identify firms with a depth of accredited family business advisors whose sole focus is to help families in business.
At Westcourt we have a unique skill set. We are accredited family business advisors with a sole focus in making family-owned businesses great. A firm with a single focus who is completely independent of investment decisions within a family is a key starting point in getting a conversation started on succession for the family business wealth.
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