"Separate Worlds" Help Avoid Family Business Problems

Posted by Rock LaManna

Worlds colliding can hurt your family business

George Costanza once learned that “worlds colliding” can kill a relationship. The same holds true when a family sells its business, as family issues clash with business objectives. To reduce friction, you’ll need to separate these two systems of your family business.

The George Costanza scene I’m referring to is when George, from the hit show Seinfeld, realized he had two parties to please - his friends and his girlfriend. Separately, he could handle his obligations to each. But once the two parties merged, things “blew up.” Family businesses share a similar concern.

Internal family conflicts can challenge even the most successful family businesses during the selling process. While the business is primed to sell, the entire family might not be on board, or could disagree with how to proceed. Here’s an example of what I’m talking about:

  • The father: The dad (this could just as easily be the mom, but I’ll go with one gender for simplicity sake) has worked hard to build his business. He’s poured his money and time to create a successful company, but now it’s time to retire. He just wants to get the business off his hands so he can finally relax.
  • The kids: Meanwhile, the kids fight over the company. Two of the children both want to run the business, but have different visions to do so. At the same time, the third child wants to sell the business out of the family - more of the “take the money and run” strategy.
  • The mother: In the middle of it all, the wife just wants everyone to get along. She supports her husband in his quest for retirement, but doesn’t want to see the business’s succession create chaos among her family.

How can one decision cause so much dissension? It’s because the family hasn’t separated its family issues from the company’s business needs - a necessary step for any family thinking of turning over the business to new ownership.

Understanding the Two Worlds, or Systems

The term “family business” implies two distinct interests, which often conflict - the family and the business. I’ve mentioned these two systems that can make or break a family business in previous posts, but I’ll give you a quick synopsis again here:

   1. Family System

  • The family system is emotion-based, tied together by emotional family connections. 
  • The family system is oriented inward, focusing on the security of its members. This system greatly values loyalty and protects its own.
  • The family system resists change, designed to stick to the status quo.

   2. Business System

  • The business system is task-based, comprised of people with common interest in the work product.
  • The business system is oriented outward, focusing on the production of goods and services. This system greatly values competency and productivity of employees.
  • The business system exploits change in the interest of growth. It adapts to ever-present and unavoidable change to survive.

Notice how each of the corresponding bullet points of each system not only differ, but are complete opposites. It’s no surprise, then, that the two systems can sometimes be at odds with one another.

How to Settle Differences and Think Rationally

The third bullet point of the family system is that it “resists change,” attempting to stick to the status quo. Well, nothing threatens to change the status quo like the owner stepping down.

Your business may have all the foundations in place - good infrastructure, sound financials, a solid valuation - but family issues can threaten all of that. If family dynamics threaten your business’s future, your family needs a plan.

That plan begins with separating family issues from business issues. Of course, most families just want what’s best for the family and the company. However, due to personal biases and family conflicts, it’s not always the rational decision that comes out on top.

“But if inner conflicts are preventing my family from thinking rationally about the business, how can I change their perspective?” It’s a tough question, and my advice is not to do it alone. You need an objective expert to help you determine the right next steps.

There are resources available that can help your family in the face of conflict. Paul Cronin of The Platinum Years is one of them. He specializes in helping people become emotionally ready to sell their business, and can help families through the selling process as well.

Just like George Costanza’s life was turned upside down by “worlds colliding,” so too can your business. Prevent a business/family world collision by keeping your business system separate from your family system. It’s the key to a successful business sale and a happier family.

Finding Your New Owner

Topics: Selling Your Business, Family Business, M&A