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Succession Fireside Chat: Should you tell your family members how much the family is worth?

Succession Fireside Chat: Should you tell your family members how much the family is worth?

Synopsis
3 Minute Read

Many family business owners are reluctant to share how much their family is worth to preserve harmonious relationships. However, discussing your finances early and setting parameters can help ensure the succession process goes smoothly.

If you have waited until later to discuss how much your family is worth, these best practices can help prepare your successor to take over your business:

  • Start small
  • Plan discussions
  • Determine comfort levels
  • Bring in a third party
National Team Leader, ExitSmart

Talking about money can be uncomfortable. Many family business owners struggle to balance their financial success with maintaining family harmony — and you may be wondering how to approach discussing your finances with your family members. Should you tell your family members how much your family is worth?

In the sixth episode of our Succession Fireside Chat series, MNP’s Lynne Fisher and Danielle Bergeron-Walsh explore how to talk about your family’s worth with your children, how to teach financial responsibility, and set expectations around your family business.

They also explore how avoiding this subject can impact the succession process, and how to approach discussing your family’s worth when your successor is not aware of your financial situation.

Watch the video above or read the article below to discover how to address the challenges that you may encounter on your succession journey.

How to talk about how much your family is worth

No two family members are the same, and there is no ideal time to start talking about how much your family is worth — and the opportunities and responsibilities that accompany it. Different people may be ready to learn more about your family’s finances at different times. These best practices can help set you up for a successful transition of ownership during the succession process:

Share early

Talk about your finances early with your children to build their awareness of your business and its financial position. While they may be too young to understand your numbers, you can get started by discussing how you use the money it provides to support your family and your values.

Set parameters

Each of your children are different, and they may have different perceptions of your family’s financial worth. You may have 10 percent ownership of a business — but if you don’t discuss those details with your children, they may expect to inherit the entire operation. Set parameters early to dispel misconceptions and ensure your family members have an accurate understanding of your financial situation.

Create a timeline

While there is no right time to start talking about how much your family is worth, there are indicators that your children may be ready to learn more about your finances and your business. When your children are young, they may be curious about buying gifts — and you can talk about how you need to save the money you earn through your business to teach the concept of financial management.

Introduce your children to your business as they grow older and begin to ask more questions about it. Bring them to the company to show them how it works and have regular conversations about your business and how it supports your family as well as the families of your employees.

How to overcome challenges during the succession process

Many family business owners choose to keep their family’s worth private to maintain harmonious relationships — however, this secrecy can cause significant challenges during the succession process. Avoiding honest conversations about your financial situation leaves your successor unprepared when they assume control of the family business and they may not have developed the skills or knowledge to manage your family’s finances.

Talking about your family’s worth late is better than never discussing the situation at all. These best practices can help your successor gain a better understanding of your financial situation:

Start small

It may be tempting to give your family members all the information they need at once — especially if this is your first time discussing your family’s finances. However, it may be more effective to share information in bite-sized pieces as it comes up naturally in conversation. 

Plan your discussion

Consider discussing your finances at certain times of the year when your family gathers together. Make sure to communicate that you intend to discuss the subject in advance and create an agenda so that everyone is prepared. Document the conversation and record agreements to enable family members to refer to it later.

Find your comfort level

Different members of your family have different levels of financial knowledge. Your family members may not have the experience to discuss complex topics about finances just yet — and it is important to communicate at their comfort level to encourage them to fully participate in the discussion. Hold one-on-one conversations with your family members to determine their comfort level before you coordinate financial meetings with your family. 

Bring in a third party

Talking about finances can be uncomfortable — and you may not be sure of the best way to approach the topic. A third-party advisor can help alleviate stress around these conversations and help to facilitate productive discussions. Additionally, an advisor is a neutral party who can navigate complex family dynamics and support negotiations.

Take our ExitSMART™ Succession Assessment

You’ve worked hard to create a successful business. Use our free assessment tool to discover if your succession planning is on the right track to get the most out of what you’ve built.

Take the next steps

While the topic may be difficult, it is important to start talking about how much your family is worth with your children early. This will help nurture their financial management skills and set parameters around how the money from your business is used.

If your successor has not been included in discussions about your family and business’ financial situation, prioritize starting small, planning your discussions, and determining their comfort levels. Bringing in a third party can also help set your successor up for success.

For more information, contact a member of MNP’s Succession Services team. We have the experience to help you build a succession strategy to minimize risks, capitalize on what you’ve created, and secure the future you’ve worked so hard for.

Contact us

Danielle Bergeron-Walsh CPA,CA

Partner

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