In a recent program for business owning families one participant asked what the options are when the next generation may not be interested in taking over leadership of the business – but may not want to sell either. Are there options beyond: ‘To sell or not to sell…?’
What we find is there are alternatives if the family is willing to develop themselves into different roles:
1) The family remains the owner but the management of the company is taken care of by professional non-family executives.
2) Ownership is shared between family and some key executives.
3) Part of the business is sold, creating a different and smaller company that the next generation is willing and capable of owning and managing.
4) Not all members of the next generation take over ownership but only one or a few – there is a ‘pruning of the ownership’
Most families will be confronted with two big changes if they decide not to sell but go for one of the alternatives listed above.
The first is to let go of the ‘equality’ principle. In the case of the family that raised the question, to date the brothers had equal shares and equal salaries. The reality is, in most alternatives described above this principle will have to go.
The second big change is to move from operational roles as owner to governing roles as owner.
Governing owners are active with the board, involved in strategic discussions but do not have to take on the day-to-day responsibility of managing the operations. For next generation members with their own careers outside the enterprise, this often can be an interesting alternative. For the family it means that the business is not sold. If it performs well it also means better financial returns in the long run.
Rather than only ask if it is time to sell the business – perhaps the a first question should be, is the next generations willing to prepare for a different role in the family business than their parents had? If so, continuing the family legacy can be a rewarding option for both generation as well as the business.