Business succession planning and the fundamental issues of life

Are you a business owner? If so, what is the real inheritance you pass on to your children?

Gary North, in the same article from which I blogged yesterday, suggests that the family business may not be part of it at all.

Potentially distressing insight, but if duly heeded and acted upon, it may make a world of difference–to your children and everyone they touch.

North writes:

[T]he founders of family businesses [often] find it very difficult to persuade their children to take over the business.

There is a good reason for this. In earlier generations, most people had relatively limited options for their careers. There weren’t that many different careers. You gained your advantage by being trained by your father or by an expert to whom your father apprenticed you. You took over the family business because you had spent years learning the details of that business. You had a real competitive advantage in this particular field. You had years of training. Presumably, if your father was successful, you gained to the skills that a successful person in this business normally possesses. So, fathers passed on the businesses to their sons.

Modern capitalism has completely changed this system of passing down wealth in the form of a family business. The reason why everything is changed is because capitalism has enabled investors to pour large amounts of money into specific businesses. As capitalization increases,
specialization increases. These businesses hire people with highly specific skills. So, it becomes possible for people to find occupations that are almost perfect fits for their skills and dreams.

This was not possible in previous generations. There was insufficient capital. As society benefits from ever-increasing supplies of capital, individuals benefit because they can find lifetime employment which matches their abilities.

This means that fathers who establish successful businesses find themselves in stiff competition with hundreds or perhaps even thousands of potential employers who are ready to hire their sons. . . .

This social development is unlikely to decrease in the future. It is likely to increase. So, fathers who want to leave large amounts of money to their children have to face the fact that the inheritance will [likely] have little to do with managing the family business. . . .

Today, a father who [leaves his children a large amount of wealth in the form of the family business] is likely to see [them] either destroy the business through lack of interest or lack of competence, or else sell the business to some large conglomerate.

This being the case, fathers need to spend a lot more time with their children in discussing what the[y] regard as the fundamental issues of life. The problem is, fathers who build up large family businesses or large amounts of money are usually too busy with their work for them to spend a lot of time discussing much with their children.

Question to consider: How do you intend to pass your fundamental worldview to your children?

If you ignore this question, please consider: What good will your business really do . . . either to your heirs or to those whom your heirs will touch?

Share and Enjoy: