While a son or daughter may seem like the ideal candidate to take over your practice, think twice, says Thomas Deans, the Orangeville, Ont.-based author of Every Family’s Business: A blueprint for protecting family business wealth.
“There’s an incredible amount of naïveté in believing your kids are the only people who will love the business as much as you do,” he says. “Oftentimes, they just don’t share that passion.”
That’s not to say it can’t happen. Deans, who once ran his family’s manufacturing business, has four pieces of advice for advisors whose kids have expressed interest in their books:
> MAKE SURE THEY REALLY WANT IT. “Children can find themselves pulled into family businesses out of a strong sense of obligation,” he says. “You need to listen to make sure that they’re passionate about the business and not pursuing it for softer, more intangible reasons, such as keeping the family legacy.”
> TELL THEM TO GET ANOTHER JOB FIRST. “Families who encourage their kids to have their own careers prior to joining the business have set them up to succeed if and when the business fails,” says Deans, who notes the average lifetime for a business is 28 years. “This way, they’ll be skilled and competent to find employment elsewhere.”
> TREAT THEM LIKE ANY OTHER EMPLOYEE. “If you set up different standards for your kids than you do for other staff members, you’re going to find it very hard to retain employees,” he says. “Non-family members are going to feel that there are no opportunities to progress; you’re also going to create a disconnect between the value the child is offering the business and the value they are extracting from it.”
> MAKE THEM PAY FOR IT. “If a child feels passionate about the business, they should buy it,” says Deans, who maintains that you can only authentically run a business if you’ve put your own money on the line. “One of the biggest mistakes an advisor can make is gifting his or her business to a family member, because you’re forcing ownership into reluctant arms.” —MAUREEN HALUSHAK
All in the family?
- By: Maureen Halushak
- February 9, 2009 February 9, 2009
- 13:55