Keeping the Family Business in Business: What You Need to Know About Succession

My father’s passing in 2003 was a complete shock to my family and me. He was only 53 years old, and then suddenly one day he was gone. That’s how quick and unexpected it was.

This circumstance forced me, my brother and my sister to assume control of Rising Sun Pools & Spas, a business he had run successfully for more than 30 years. Thankfully, my father had put together some basic procedures regarding estate and financial planning that eased our burden somewhat.

RELATED: Buying the Family Business  

Additionally, my siblings and I had the benefit of having been in the family business since our childhood, so we were familiar with what was involved in running it. Still, it was not an easy transition for any of us to make.

Even if you know in advance a parent, guardian or family friend is dying or retiring and wants to give you the reins to run the business, succession can be difficult if not conducted properly. Here is how we handled it, followed by my thoughts about what I learned along the way.  

Define Your Roles

When my father died, my brother, Michael Vassallo, had experience in the construction and service divisions of our pool business. My sister, Gina daRoza, concentrated on human resources and accounting, while my expertise was in marketing and retail operations.

This was a big asset to us because it limited the number of “turf wars” we had regarding issues we encountered in operating the company. Since we know the areas for which each of us specializes, we defer to the one with the most experience in them to make final decisions regarding related issues.

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It is crucial that you specify who is control of what aspects of your company during a changeover in leadership. Otherwise, the result can be utter chaos, as individuals will constantly squabble over who is most knowledgeable about the issues at hand. 

Communicate and Show Respect

Having different duties will lessen but not overcome conflicts. For that to happen, put in place a method of making decisions fairly among all participants involved in overseeing a business.

My brother and sister and I lead by consensus. We often to defer to Michael in taking the final stand, as he is the eldest with the most experience in the industry, but all three of us come to our conclusions collectively regarding everything from logistics to insurance and more. At least once a week, we sit down to talk about what is happening in the business and have time to express our thoughts thoroughly. We may not agree 100 percent on the outcome, but we know our concerns have at least received a fair hearing.

Along the same lines, we keep our business activities within the confines of our workspace. When we socialize at home or away from the office, we never discuss work situations unless there is an emergency requiring us to come to the business itself. This separation is essential for a successful succession to work among family members, in my opinion. 

If you are working alongside family members in a new situation, consider group counseling as well. We discovered this process cleared up some misconceptions we had about each other and improved our ability to oversee our company.   

Consider Your Options

There may be good reasons you don’t want to assume control of a family business, such as new competition in your service area or just a lack of interest in the responsibility. A big consideration would involve a buyer wanting to purchase the company from you, typically under the condition that you relinquish your interest in it.

RELATED: A Wise Succession Decision 

Our family did have a serious discussion about whether to continue Rising Sun Pools & Spas after my father’s death. In the end, my brother, sister and I agreed that this was not the right choice. We had grown up in the industry and already developed relationships with many customers, so we chose to stay with the business since it’s what we knew and loved best. Such a conclusion may be different for you. 

Plan Ahead and Expect the Unexpected

Having said what to do once succession begins, let’s mention what should happen prior to the event. Without a doubt, having financial advisors and tax experts guide you into setting up procedures and backup plans for succession is the best proactive approach you can take. 

While these individuals can of course save you and your loved ones money – they can put your family in a favorable tax bracket while they cope with the loss of your income, for example – their biggest asset is that they will have systems put into place that can be activated literally within minutes of your retirement or passing. 

Lastly, "patience is a virtue" is more than a saying. It is what you will need when changes occur in your family business during succession. You must anticipate that it will not all be smooth sailing. Take a breath when mistakes occur, then correct them and move forward.

Michael, Gina and I have not completed our own succession plans officially, as our six children are still young (the oldest is 14). In the next five years, however, we will have a better sense of how many of them are interested in continuing to work in the family business and will plan accordingly from there.

If they decline to keep up Rising Sun Pools & Spas, then we will seek an appropriate buyer. After all, for succession to work best, you need people truly interested in the fate of your company to carry your legacy. A proper succession process will greatly benefit your family, even if they choose not to follow in your footsteps. 

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