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Family Wealth Series: Let’s Talk About a Succession Plan for Your Business

Many families wait too long to discuss business succession plans with the next generation. Here are family dynamics tips from Wells Fargo Private Bank for how to get started now.

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Many family business owners assume their children will take over the business—even though they haven’t discussed it with their children or created a succession plan. This could ultimately lead to disappointment, says Douglas Box, Family Dynamics Consultant at Wells Fargo Private Bank.

“Business founders have preconceived notions about how the transition will work, but their children may have other passions, or they may prefer to pursue their own careers,” says Box. “That’s why it’s so important to have ongoing conversations about the business.”

Here, Box shares five important talking points to keep in mind when discussing a family business—and a succession plan—with adult children.

Start the conversation with the company’s history

Sharing the story of why you or another family member founded the business is a great way to foster a dialogue about its legacy, Box says. “That can help you gauge your children’s interest in taking the business over one day.” Box says stories are powerful. “Family members a generation removed may not know why grandpa started the business. It could uncover a compelling reason for the kids to continue the family business.”

Discuss the positive impacts of the business

Discussing the vision behind the company can help your children feel more invested and preserve family harmony if there are differences down the road. The question to answer: How are your products or services making a positive impact on people’s lives? “If the family business is just about making money and building wealth, I’ve found that family members are more likely to take their chips off the table and move away,” Box says.

Other topics to consider discussing include the types of charitable causes your business supports. (Learn more about books that offer valuable insights into making charitable giving meaningful for you and your loved ones.)

Offer ways to involve your children sooner if they express interest

Box advises having one-on-one conversations with your children if they show interest in taking over the family business, and checking in regularly to see if their feelings have changed.

As you begin to formulate your succession plan, share the details and the reasoning behind the plan, and make sure you leave plenty of time for it to unfold. The best plans are made together with your children, are flexible, and take a few years to implement. “Many families wait too long to put a system in place,” Box says. “Succession should be a process, not an event. You don’t want it to happen too fast.” 

Think about creating a family council

Consider inviting adult family members to serve on a family council or family board that meets regularly to talk about the business. During the meetings, discuss the company’s financial and operational performance, short-term challenges, and long-term goals. If one family member emerges as an obvious successor, the meetings could help establish how other family members can still have a say in the business, Box says.

A lot of business owners are reluctant to divulge too much, but sharing information is another way to help your children feel a sense of ownership, Box says. It also gives them an opportunity to ask questions and share feedback and concerns. (Learn more about three key practices that can help foster productive conversations about family wealth.)

Consider using third-party facilitation for your family meetings

Bringing in a third party to help facilitate family meetings is often helpful, especially in bringing together multiple viewpoints among generations. Consider a professional with experience in recognizing communication patterns and resolving conflict. “A neutral facilitator can help guide the conversation and really change the dynamics in the room,” Box says. “They can also make sure everyone has a chance to speak up.”

The goal, Box says, is to foster trust among all family members, even those who want to play only a minor role in the business. Open communication can help protect your family business and ensure its legacy for generations to come.

Michelle Crouch writes about consumer finance, parenting, and more from her home in Charlotte, North Carolina. Her work has appeared in Reader's Digest, Parents magazine, and The New York Times.

What can Wells Fargo do for you?

Creating a plan for every generation of your family can be a challenge. Schedule time with your team to get started.

Wells Fargo & Company and its affiliates do not provide legal or tax advice. Wells Fargo Advisors is not a legal or tax advisor. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

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