Series of Succession Planning

Most people have heard the statistics about the “lack” of success in succession planning, with only 30% of family-run businesses successfully transitioned into the second generation and only 10% making it to the third.

My goal in educating myself on family business was not to learn why these families failed, but to learn the reasons why they succeeded. I believe that success leaves clues. In this series of articles, I’d like to share with you ideas, models, processes and strategies that were incorporated by those “successful” families in transitioning their business to second and third generations.

“People don’t know what they don’t know”

What’s behind the statistics that causes such a high rate of failure for these family businesses and their existing advisors? (70% to the second generation, and 90% to the third)

I like to use the iceberg analogy. When you see an iceberg, you are really only seeing 10-15% total mass of its entirety. In most family businesses cases, the advisors are only exposed to, and give advice on, the “technical” issues of the business, i.e. the business plan, cash flow, year-end, balance sheets, assets, taxes, wills, shareholder agreements, etc.

“Experience is a great learning tool, but the tuition can be very high!”

What about below the surface? Statistics show us 25% of these families fail because the second and third generations are not educated, properly trained, motivated or mentored for their rolls in the business. And then there are those who just feel entitled or experience nepotism.

But that’s not it, statistics also show us that a whopping 60% fail due to a lack of communication! There may be secrets, a family infighting, jealousy, bad blood or just plain not speaking to one another, and unfortunately, the skills to deal with these issues seem nonexistent within those families.

Like I said, issues can lie below the surface and are not open to daylight, therefore, expert advisors mostly find themselves working on the technical side, since the families were unable to communicate the real issue(s) at hand. Only 15% of family businesses fail from all other causes.

Who is Kelly Adams?

After graduating St. Mary’s University with a Business Degree in May 1977, I joined the life insurance industry and went right into a management position. After 14 years of being Branch Manager for Manulife Financial (Nova Scotia & Newfoundland), I left to pursue my own business in June of 1999, and in May of 2000, Barrington Wealth Partners Inc. was incorporated nationally.

I am the founding partner of BWP Inc. and as of today, we have 37 offices from St. John’s, NL to Vancouver, BC. My wife Sharon and I married in November 1976 and together, have four boys, Robbie, Chris, Michael and Andrew. With three of my boys currently working in the industry, I made sure to have a “written” succession plan in place.

As one of three executive members of Barrington Wealth Partners Inc., and the Chairman of the Board, I often get the opportunity to work with many successful family-owned businesses. My area of expertise lies heavily in Estate and Family Business Succession Planning, a practice I’ve been running since transitioning from management. The estate planning side is natural because of the knowledge I’ve gained over the years, but it doesn’t hurt to have the following designations and education: Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC) and Certified Financial Planner (CFP). Now, to get to ‘succession planning specialist’ is a whole other matter!

Like most advisors with my background, I considered myself a bit of an “expert” in Family Business Succession Planning – until one day, I was challenged. In the fall of 2009, I was having a coffee with Terry Carter, CA in Halifax, and I said something like, “Terry, you should introduce me to one of your good family business clients, so I can help them with succession planning.” He then said, “Kelly what do you know about succession planning?”

I spent the next ten minutes talking about my designations and experience, and he agreed that I am indeed, skilled in the estate-planning, technical side of taxes and insurance portions – but that was it. See, Terry had just spent a weekend in Toronto at a boot camp on succession planning and saw that after 20 plus years as a practicing CA, working elusively with small business in Halifax and the surrounding areas, he really had “limited” expertise dealing with the very big area of true succession planning.

We came to a quick conclusion that we were both in the same boat; we each were experts in our own technical area, but quite naive when you took in the whole subject matter. Terry said, “Kelly, I’m too busy with the work in-hand to even think about putting the time in that’s needed to become an expert.” For me, I was looking for a way to get back into sales and differentiate myself from the competition. I saw a huge opportunity with the baby boomers. I said, “I can get excited about this, and I need to get educated!”

In the spring of 2010, I took a two-day course from CAFE and received my certificate for their Family Counselling Course. That was just the start – in February 2011, I was part of the second graduating class for the Family Enterprise Advisor program put on by the Sauder School of Business, of UBC. I took the eight-course program in Toronto over the next year and a half and received my FEA designation in May of 2013. After many written exams and a three-hour oral exam, I can proudly say I’m educated and on track to becoming an expert!

Author: Kelly Adams, BWP Advisory Services

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