How to pass the family business baton to the kids

Talking and preparation are the keys to success when getting ready to hand over running of the family business to the next generation, say Queensland succession planning experts.

From L-R: Karen Bird, Ann Marie Matthews, Suzy Munt, Richard Clamp, Paul Rafton, Susan Rix, Chris O’Connor, James Osborne and Gavin Bird at the BDO/The Courier-Mail boardroom lunch. Picture: David Clark

Having a succession plan in place can ease the process of handing over the reins of the family business to the next generation and can be helped by open and honest communication.

In a discussion on Family Business: Giving while living, Queensland family business leaders reiterated the importance of communication and preparation at a recent lunch hosted by BDO and The Courier-Mail.

Archerfield Airport owner Gavin Bird said giving while living is a point often made by wife and airport co-owner Karen Bird.

“It’s finding a way to make sure that our kids aren’t waiting on until it’s too late to have anything,” he said.

“You can have them still waiting and knowing that they’re going to inherit the inheritance, but what the hell’s the use of inheriting worry being a 60-year-old if you haven’t had control (of the business) yourself.”

Similarly for Sunshine Coast-based Airbag Man managing director Richard Clamp, the philosophy of giving while living came from a friend who had bought his 18-year-old daughter a sports car.

“(My friend) said my philosophy is if I can do it now and they can have it now, why not have it now - it sort of changed my thoughts on this giving while living, because one day I’m going to be dead,” he said.

With both his sons in the family business, Mr Clamp also understands that everyone has different perspectives.

“My scattershot philosophy was like it’s just family - we share it, there’s no problem, don’t worry about it,” he said.

Richard Clamp, Paul Rafton, Susan Rix and Chris O’Connor at the BDO/The Courier-Mail boardroom lunch.

“But then I realised that everybody’s got different values as well.

“At the end of the day, if something’s not right in the business, for what the business needs, then it’s got to be said. You’ve got to be fair and equitable.

BDO Business Services Partner and family business specialist, Suzy Munt, said “communication is key” for everyone to get everything on the table, to know where everyone stands and what they can expect when handover occurs.

“When we update wills, we get owners and parents to sit down with each of the kids to talk about what’s going to happen, and make sure they understand how that affects them,” she said.

“What are the impacts and the risks of what’s going to happen to them? Just having that conversation upfront helps to then shape what the will looks like.”

O’Connor Ruddy & Garrett Solicitors Director, Chris O’Connor, often observes a lack of communication and planning with family business legal cases.

If a family business owner passes without discussing and preparing any form of succession planning, the resulting dispute over who gets what can be a lengthy and messy process.

“It’s just one of those things where if everyone was able to sit down, get some sort of agreement together, then all of this would be avoided,” he said.

“Particularly in the family business situation, what may be relevant now may not be relevant in three, five or 10 years’ time.

“Like a will, it’s a living document and it needs to change as the circumstances do - as long as you have this communication.”

For Ann Marie Matthews - the CEO of Brisbane-based child, youth and family intervention service, YCSS - her decision to involve her kids in the family business has changed through conversations with them over the years.

“We’ve been operating for 17-and-a-half years and right from the beginning, we always said that we will never get our kids involved in our business because it’s far too complex, and we didn’t want to put that onus on them,” she said.

As the business grew, more family members joined the business including two of her eldest daughters, which prompted conversations about taking over the business.

“It was having a conversation with both of them to ask; ‘is this something that you see yourself doing?’ ‘Do you actually want to take this on?’,” Ms Matthews said.

Tossing up between decisions to sell the business, have the next generation take over if they want to and how involved to be after retiring “actually causes problems”, Ms Matthews said.

BDO Business Services and family business Consultant Susan Rix AM agreed.

“Even though you might feel as though you’ve handed over the reins, you haven’t really because you’ve still got the ownership and the worry of the financial aspects of the business,” she said.

“You might have stepped back from the day-to-day but that doesn’t stop you from worrying about it.”

Being involved in a different capacity might help make the transition out of the business easier, while still handing over the business to the kids.

“If you’re actually there you know what’s going on rather than trying to relax and retire and not have any idea,” Ms Rix said.