LEAVING A FAMILY LEGACY
Updated: May 30, 2022
Legacy is a fundamental part of life – it gives life meaning. Legacy is much bigger than an estate plan that passes down tangible assets. it is the connections, the traditions and the opportunities we transmit to those who come after us. It is what we have learned from the past and what we hope for the future. It is a bridge between what we have constructed in our lifetime and what will be built by future generations.
If you asked business owners to list the advantages of membership in a thriving family agribusiness, many would mention the opportunity to leave a legacy for future generations. These business owners might be thinking chiefly about the operating company and other tangible assets. But a legacy encompasses more than just material wealth; it also includes the family’s emotional, relational, educational and spiritual inheritance.
Legacy is a daunting concept. After all, if your business is to be perpetuated for another hundred years or more, it follows that your decisions today have ramifications not only for your children and grandchildren, but also for those born after you are gone.
To ensure a smooth succession, you must take steps now to instil the values of stewardship, family loyalty and sharing. These values become the foundation that keeps families strong over time. Education, communication and strong values set the family on the right path to creating a legacy with the potential to last over 100 years.
Leaving a legacy is like passing a baton in a relay race, except the transfer happens in slow motion. We leave a legacy in the values and priorities we pass on to our children. We leave a legacy when we teach co-workers how to perform a task or approach a challenge differently. We leave a legacy when we set an example for others. Entrepreneurs and family agribusiness leaders must consider the impact of their legacy on all stakeholders – owners, family and employees.
Planning for the continuation of the business is the ultimate management challenge. It requires vision and commitment. It requires the balancing of short- and long-term issues and goals. As many business owners know, there are plenty of urgent short-term challenges that pull time and attention from long-term planning. Most business leaders wait too long to consider the legacy they want to leave their families.
Building a legacy that will thrive for generations, life building your family agribusiness, requires a focused effort. This complex undertaking is best addressed like any other large project; it should be broken down into manageable parts. Deadlines should be set for each task. As each task os completed, new tasks will be defined.
Involving the family with the business is the first project to be addressed. The owners must motivate the next generation for family members to truly engage in the business. Family communication and involvement ate important components of this process. Tasks that are necessary to motivate the family may include, but are not limited to:
Developing the children’s values and capabilities.
Talking about the business at the family dinner table.
Providing appropriate educational opportunities for the next generation.
Creating a family employment policy that spells out requirements for joining the family agribusiness.
As next-generation members get older, involve them in creating a family mission statement. Help them understand the many rewards and opportunities of family agribusiness ownership.
A plan must be developed to ensure financial security for the current family agribusiness leaders. Steps include: · Requiring each family member who is active in the business to develop a personal financial plan allowing for comfortable retirement.
Developing tax-efficient retirement plans for the spouses of family agribusiness leaders.
Defining post-retirement endeavors that will provide current leaders with new challenges and opportunities (teaching, consulting, charitable work, etc.). Pursuing these interests will provide a meaningful next chapter in their lives.
Another significant objective is building a management team, which may include key non-family employees as well as family members. Career development must be a deliberate effort. Individuals should be encouraged to learn and grow.
Tasks necessary to meet this objective:
Identifying those with the potential to be the successor. Given the unpredictability of the future, it is optimal to develop multiple individuals who could potentially fill the role.
Creating a development plan for potential successors, including career path options.
Ensuring that sufficient incentives are in place to retain key non-family managers.
Assessing the cost of the succession plan. This includes building the management team and supporting their development, as well as funding the senior leaders’ retirement.
Independent directors or an advisory board can provide support and guidance during the management development process. A board may also be helpful in recruiting talented managers from outside the company.
In addition, the family should consider establishing a family council to address the concerns of family members who don’t work in the family agribusiness. Resentment can grow if passive shareholders’ liquidity needs are not being met. A well-designed buy-sell agreement will enable these shareholders to exit. The cash required to buy out family shareholders or make distributions to the entire shareholder group must be calculated.
If the next generation of family members do not have an interest in working in the business or are not capable of managing the company, the family must consider two options: developing an exit strategy or appointing non-family professionals to run the business. Family members might be actively involved in business investment decisions while non-family leadership manages day-to-day activities.
Families who decide to sell their company can continue working together on other business endeavours – for example, by forming a family office or family investment partnership. This is a way to perpetuate the family’s entrepreneurial legacy even after the business is sold.
The legacy plan must be fluid; it should be adjusted to reflect changes in the family, the business environment and the family’s financial needs.
Over time, the roots of many trees in a forest graft themselves to one another; creating an independent underground foundation. Similarly, a family legacy connects past generations to those who will come after us, providing strength and support.
Next article in the series – Legacy: The Importance of family unity. In addition to financial success, a family must be connected to each other and have a shared identity that is a source of pride.
Published in the March 2022 Edition of Farmer's Weekly
Family Legacies www.family-legacies.com is a multidisciplinary family business consulting company. Our consultants are leaders in their respective fields including; Family Business Consulting, Strategic Planning, Financial Planning, Wealth & Risk Management, Corporate Finance, Business Transitions & Exit Planning - Buy, Improve, Grow & Sell Businesses, Commercial & Family Law, Executive Coaching, Leadership Development & Facilitation, providing our clients with a professional and integrated multi-disciplinary service.