Common Causes of Family Business Conflict & What to Do About Them.
Family Business Mediation Video No 36: Personal Financial Security.
By Jon Kenfield. Solutionist.
• Financial security tends to become a more serious issue as people get older and have less capacity to adapt and overcome financial challenges.
• Fear is always a major motivator and financial security, or the lack of it, is an easy thing to get bent out of shape over. From “bent out of shape” to “in conflict” is not a long journey when 2 or more generations are involved.
• Ages and stages: as older family members start looking towards retirement, or at least lower income generating capacity, they become more concerned about preserving money and transferring it out of the business into personal savings, or alternative investments. Their personal financial security becomes a very personal arrangement.
• Meanwhile, younger family members have much longer time horizons, and more immediate funding needs. These needs are internally conflicted but usually boil down to a desire to invest in the business to provide for the future, over the long term. If the business isn’t investing in its own viability, it may not have any viability. Personal financial security comes from sound business arrangements.
• Owners cannot responsibly hand over the keys of the kingdom until they feel safe and secure, no matter what happens to the business.
Solution:
• Recognise and respect that “personal arrangements” can conflict with “business arrangements” when immediate needs clash with longer timeframes.
• Develop and agree a financial plan for outgoing family members that eliminates business liabilities (eg: assets used as security) and provides secure personal funding for life, irrespective of the fortunes of the business.
• Consider vendor terms purchase arrangements for business interests if there are no other options.