Getting an early start helps prepare for the unexpected.
Separating business from family is “impossible,” says Jeremy Samatas, owner of family-run The Lucky Monk in South Barrington, Illinois.
Samatas inherited, through a succession plan, one-seventh of his grandfather’s business (which included one restaurant, several hotels, retail operations, and some senior care facilities) in 2004. The remainder of the business was split between his siblings and cousins.
And now, at 36, recognizing the work that’s involved, Samatas feels his family has left succession planning until too late.
While members of the generation between the owners and the deceased grandfather (the parents) still operate the business, they now want to pull back and pass on the reins.
“The hard conversations with us have been excruciating,” Samatas says. “It’s been hard—going from a family-run business to a more business model—getting away from the family part of it. You can get tripped up because you don’t want to hear hard things from a relative. But, at the same time, when your dad talks to you, you don’t hear a businessman talking, but you hear your dad.”
And Samatas fully expects succession planning to be very difficult.
“I love these people as family members, but it truly has to be business first. It’s going to be an uphill battle.”
Every business, large or small, needs to have a succession plan. The plan will determine in the case of death or retirement (or partial retirement) who will own and run a business.
Emotions nearly always run high during succession planning. These could be the emotions of the person creating the plan, as he or she struggles to do what is best for the business, family members, and employees of the business.
Or it could be the emotions of family members, who receive more or less than they expected.
The reality is that most families will delay setting up a succession plan because they don’t want to rock the boat.
And there’s also the argument that succession plans should be put in place to prepare for the unexpected.
Walter Zweifler, CEO of Zweifler Financial Research, New York City, points out that sudden death or incapacitation can mean all of a person’s debts are due in total and immediately.
It can also mean the automatic offset of any life insurance to be paid to the business (any life insurance that would have been paid to beneficiaries is instead paid to any creditors of the business). And it can lead to strife and contention between survivors inside and outside the family.