In the next ten years, a large number of managers will have to transfer their businesses.

Indeed, according to a study published in 2023, this stage concerns around 700,000 businesses to be sold, a quarter of which are run by business managers over 60 years old.

Among the businesses concerned, several are family businesses. However, contrary to popular belief, passing on a family business to the next generation is never easy.

It is an often delicate stage, marked by tensions and sometimes by virulent conflicts.

So much so that, according to a study published in the Next Generation Barometer in 2015, only one family business out of three managed to successfully pass on this transfer.

Faced with this challenge, we therefore decided to study What is the purpose of succession planning and why is it essential in the case of a transfer of business.

Are you going to be faced with the transmission challenge? Anticipate and avoid potential conflicts.

Review estate planning best practices and strategies for dealing with family disputes related to inheritance.

What are the challenges of business succession planning?

A succession, whether family or professional, can awaken deep tensions, even if on the surface everything should work out as well as possible.

Money and wealth issues are often mixed with personal disputes or suppressed resentments.

Disagreements can come from the content of a will, the value attributed to an asset, the distribution of the inheritance or even old donations experienced as unjustified.

So, a family business combines many strengths, which can nevertheless turn into weaknesses in case of dissension.

But these succession disputes, which are frequent between individuals, have completely different consequences when the transfer of a business is at stake.

They can then threaten the sustainability of the company and the future of employees.

That's why Preparing a solid succession plan in advance is essential whether you want to pass on the ownership of your business from generation to generation within the family or to pass it on to third parties.

Indeed, an effective succession plan makes it possible to:

• preserve the talents and know-how essential to the company;
• ensure business continuity and avoid paralysis;
• protect the company's assets and the interests of the manager;
• reduce to a minimum the burden of taxation linked to the transmission;
• encourage the agility and the ability to adapt the structure;
• take into account the development wishes of employees in order to promote their retention;
• Define clear strategic objectives that focus on both continuity and innovation.

Succession planning is therefore much more than appointing a successor: it is preserve your vision, anticipate the future needs of the business and create the conditions for a harmonious transition.

By adopting a thoughtful and strategic approach to succession, the manager ensures the stability of his organization while offering it the means to last and develop.

Common causes of conflicts in the succession of a family business

La Transfer of a family holding is a crucial moment, both economically and humanly.

And even if the law regulates the process, it is not uncommon for disagreements to arise between family members during the handover.

These tensions can take several forms:

• Questioning the founder's decisions : some heirs may contest the distribution of capital or the appointment of the successor, considering that they have not been consulted or have been unfairly dismissed.
• Disagreement over the value of the company : differences in the method of estimating property or in the distribution of shares can quickly create a climate of distrust.
• Misunderstanding around donations or early transmissions : transfers made during the lifetime of the manager, if they are not clearly explained, may be perceived as unfair.
• Presumed impairment of the hereditary reserve : some heirs sometimes feel that their rights have been reduced in favor of other family members or external partners.
• Challenging the planned development projects considered too far removed from the values of the founder.

These disputes often lead to a Judiciarization of succession, extending transmission times and weakening the company.

‍In addition to the financial costs they generate, these conflicts endanger family cohesion. And the stability of the company that are put to the test.

In addition, there is the complexity of fiscal, administrative and asset procedures, which can further accentuate tensions.

Best practices in business succession planning

Anticipating the succession with the next generation is therefore essential in order to guarantee business continuity and preserve family values and relationships.

A well-thought-out preparation can avoid many pitfalls.

Here are the main precautions to take:

• Coordinate on a family strategy to ensure business continuity and strengthen the financial interests of the family.
• Develop a clear succession plan, defining the stages of transmission, the schedule and the responsibilities of each.
• Writing a will in accordance with the law, unambiguously expressing the wishes of the manager.
• Set up a sharing donation to distribute titles or assets between the heirs in a balanced manner and thus avoid any subsequent disputes.
• Conduct an objective assessment of the business, an inventory carried out by an independent expert, in order to ensure the transparency of the process.
• Protecting strategic positions and key competencies to guarantee the sustainability of the activity after transmission.
• Preparing the successor through support or training with gradual transfer of responsibilities. The establishment of a mentoring system is particularly appropriate.
• Inviting all parties concerned (family, partners, board of directors, management committee) in thinking to promote membership and trust.
• Anticipate the tax consequences of the transfer of a business, in order to optimize the conditions of transmission and to secure the assets.
• Establishing clear governance, with defined rules for decision-making and strategic continuity.
• Ensure post-transmission follow-up, in order to verify the correct implementation of the plan and to make the necessary adjustments.

A well-prepared succession depends above all on communication, as well as on its planning.

By explaining his intentions and by involving the family in his transfer process, a manager can much more easily maintain both The company and Family balance.

The emotional impact of family conflicts on business management

In a family business, disagreements are never confined to the private sphere.

When they fester, they create emotional tension so strong that it impacts business activities.

A decrease in productivity

When members of the same family are in conflict, attention is diverted from professional goals.

Personal resentments take precedence over collective success, which slows down work and compromises the quality of results.

Projects are bogged down, deadlines are getting longer, and the general motivation is crumbling.

Relationships that are deteriorating

Even latent tensions do not only damage family ties: they also affect employees, customers and partners of the company.

A conflictual atmosphere can increase employee turnover and undermine the trust of the entire company network, whether business partners or customers.

The more divisions set up, the more difficult the business becomes to run.

Financial repercussions

Disputes over economic decisions, whether investments, profit sharing, or strategic directions, can lead to the loss of time and money.

In the most serious cases, a separation between members of the same family can lead to a division of assets that permanently weakens the financial stability of the company.

Such a situation may even lead to the dismantling of it.

A tarnished brand image

In a family business, the reputation of the company is often closely linked to that of the family that runs it.

Also, notorious conflicts can taint this image.

Indeed, customers, partners and investors often expect these companies to reflect cohesion.

However, prolonged discord can damage this harmony and impact the company's position in its market.

With potential effects on the business and on the turnover of the structure.

Communicate better within the family

In view of the observations mentioned above on the impact of tensions on the sustainability of businesses, we understand that the success of family succession depends above all on the quality of dialogue between its members.

Exposing your intentions clearly, explaining the reasons for your choices and listening to everyone's reactions helps to avoid many misinterpretations.

In blended families, where relationships are sometimes more complex, this transparency is even more essential.

Transparency, the key to peaceful transmission

An open and honest discourse on transmission projects considerably limits tensions and strengthens the cohesion of the family group.

Explaining one's intentions, the roles of each and the planned distribution of one's assets allows heirs to perceive the logic of the decisions taken and to accept the consequences more calmly.

By informing everyone in advance, we avoid misunderstandings and resentments that can poison family relationships.

Finally, transparency maintains trust: it establishes a feeling of mutual respect and mutual understanding, which are essential conditions for harmonious succession.

Encouraging dialogue within the family

For this transparency to be fully expressed, it is necessary to establish a genuine dialogue.

Organize family reunions is then an effective first step: these moments of exchange facilitate the expression of one's wishes.

They make it possible to discuss sensitive topics face-to-face and to listen to everyone's reactions.

Leave A written or filmed record, in the form of a letter or a short video, can also help explain your choices and avoid misinterpretations after the fact.

Finally, when it becomes difficult to exchange calmly, the recourse to a third party without bias (such as a wealth advisor, notary or mediator) can be invaluable in relaunching communication and defusing emotional tensions.

The key role of the external advisor in family business succession planning

The support of a specialized lawyer

When a succession promises to be complex, the advice of a lawyer specialized in inheritance law is invaluable.

It accompanies the heirs at each stage, informs them about their rights and guides them through the administrative procedures (declaration of inheritance, inventory of assets, division of assets, etc.).

This assistance reduces the risk of errors and prevents disputes between generations and between heirs.

The lawyer also plays a Mediating role when tensions develop. Her intervention helps family members to resume dialogue and find conciliation solutions without going to court.

If an amicable agreement proves impossible, he then defends his client in court, ensuring that his rights are respected.

Finally, this professional can advise on the best tools to adopt to organize your transfer (will, gift or life insurance) according to the specificities of each company and each family.

In fact, these contracts make it possible to ensure a clear and fiscally advantageous distribution of assets.

To avoid legal proceedings, give priority to support

As mentioned above, the transfer of a family business is not limited to leaving its capital.

This is a specific stage in the life of a company for which support from both the current manager and his successor can be very relevant.

One specialized coach or interim manager can help the manager to organize his succession and the future manager to develop his skills, to find his position and to establish himself as a recognized leader.

Chez VISCONTI Partners, tailor-made support programs are offered to members of the ruling families.

The goals: strengthen their leadership capacities, familiarize them with good governance practices, and help them manage the challenges specific to transmission.

Because ensuring the continuity of a family business cannot be improvised.

Rigorous preparation and appropriate support are the keys to a successful transition between generations, making it possible at the same time to respect the heritage, avoid conflicts or facilitate their resolution if necessary, while turning the company towards the future.

Are you considering the transfer of your family business?

Discover without delay the support dedicated to family businesses VISCONTI Partners orchestrated by our business coaches.

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