by Karen Murphy, MostChoice.com

Transferring the control and power of a family business to the next generation is a delicate task. If done successfully, the transfer will promote family harmony and not family discord. However, if done unsuccessfully, family relationships can tear apart and businesses can be ruined.

Confusing Family and Business

Family businesses often confuse the issues of the family and the business. The two often become intertwined. The trick is to step back and look at both from a unbiased perspective. Not everyone has the ability to remain unbiased. You may feel obligated to pass control of the company to an unqualified and undedicated heir, doing both your business and your family a disservice in the long run. Besides jeopardizing the financial success of the business and the family's earnings, you are setting up the chosen heir for possible failure.

The personal and emotional factors involved in the transfer of a family business from one generation to the next are just as important as the financial factors. In fact, many believe that it is the relationship issues and not the financial issues that will determine the future success of a family-owned business. However, this underestimates the importance of financial planning. Operating without a financial plan can be devastating, with estate taxes claiming a majority of your assets and leaving your heirs with no way to finance the business.

It is best, then, to think of both the financial side and the relationship side as being of equal importance to family business survival. Both are key to proper succession planning.

If both are of equal importance, you may wonder why so many leave the family-related issues of the succession planning process up to chance. The issues of succession that face the business owner are immense. If you have more than one child, how do you determine who will be in charge without insulting the remaining heirs? How do you determine what role each one should play in the business? How do you go about training the individual and how do you keep family issues out of the workplace? In many families, a clear solution may not be readily available or attainable.

That's where a succession planning consultant can help. A good succession planning consultant will specialize in the intricacies of family transfers. There are other types of consultants that can help you with the financial or legal aspects, but a succession planning consultant should be able to give you the best advice when it comes to dealing with family relationships during, before and after a business transition.

Consultant to the Rescue

The consultant offers two major benefits to the family business: objectivity and credibility with other family members. Acting as somewhat of a group counselor, a succession planning consultant can offer guidelines for managing the family issues and can even help you determine which heir is suitable to which task without risking the insult an insider's opinion can sometimes bring with it.

A consultant, with his or her professional perspective and technical skills, will deliver the motivation, method and objectivity that most families are lacking when it comes to succession planning. Typically, a consultant will help you identify and train suitable family members to operate the business. Specifically, they will gather information through one-on-one confidential interviews with the business owner, each member of the next generation, and occasionally non-family members.

This process often exposes secret concerns among the members that can be dealt with during a series of planning sessions. The planning sessions encourage open and honest communication between family members, clarifying expectations and increasing the level of comfort associated with certain decisions.

The end result of the process will be a series of decisions including: who the next leader will be, when the transition will occur, what role the current owner will play after stepping down, what possibilities exist for other family members to continue working in the business, and how to deal with non-active family members regarding ownership. The process will also help define the company's long-term vision, values, strategic issues and organizational structure.

Ensuring Quality

It's not easy to know who will be the best consultant for your business, but you should always make sure you follow some sort of process in choosing one. The first step to finding a good consultant is defining your needs and determining what you expect from the consultant. With this in mind, start collecting written proposals from several sources. Before choosing which one is best for you, request a formal presentation from each of the candidates regarding their capabilities and experience in a situation such as yours. Always clarify any ambiguities by asking questions and be sure to check their references.

After choosing the consultant that's right for you, be sure to have your lawyer draft a contract or at least review the consultant's contract. Just make sure that you have a clearly worded statement that sets forth objectives, schedule, estimated costs and other conditions before you make any commitments.

While using the services of a consultant, it is important to remember who is in charge of the decisions. It is up to you, the family members and managers to make the important choices. The consultant, as an unbiased observer, can only analyze your problem, suggest what is best and aid in understanding, as well as facilitate the implementation of your decision. If you hand over responsibility for the final decisions, you may not be happy with the result. You should also meet on a regular basis to discuss the consultant's progress and your feedback on the process. You may want to schedule these meetings in the consulting contract. In this way, your consultant can benefit from your reactions and can keep apprised of any changes in your initial goals and decisions.

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