Jonathan Berman
Partner, Mishcon de Reya
When is the right time to transition to a family business? Before considering the right time to transition it is necessary to understand what we mean when we describe a business as a family business.
The term could be used to describe a business run by members of one family but that is not the benchmark that we in this series have treated as definitive. Rather for us, a family business is one where the management in their decision making balance the needs of the business with the interests of the family. So it may be that the management is exclusively run by family members but not necessarily so. Indeed, there are family businesses where family members are not involved in any capacity.
Turning to transition, whilst some businesses are established with the family’s interests in mind, most founders spend the initial part of the lifecycle of the business proving their product first to themselves and then to their target customers. In that formative period at least until the business has been shown to be sustainable and the initial fight for survival has been won, there is likely little available space or appetite for the management to consider options and strategy beyond addressing the immediate needs. Once the business itself has been proven to be sustainable and possibly much later, the founders may turn their attention to transition. Timing will often present itself, for example, when the next generation join the business or express an interest in doing so. Likewise, despite the founders wishes, it often becomes apparent that the passion of the founders is not necessarily shared by the next generation. The founders will be best placed to recognise when, if at all, the business should prepare itself to transition or not as the case may be.
What is valuable however, is to ensure that the founders are nudged to think about the transition and the practical aspects and planning that surrounds this and hopefully this series of videos and accompanying articles will act as a stimulus in that regard.
This video is the first in our series addressing the relevant subjects relating to the lifecycle of a family business, helping you to successfully navigate any issues that commonly arise along your journey.
Click the link in the description below to read the first article in our Families in Business series and also to find further information on our team.