Family businesses are the lifeblood of the economy. So it is incredible that so many practitioners actively forget the element of a family in a family business and this can be an opportunity lying in waiting for many of us.
The most trusted advisor
The marketplace is rampant with advisors vying for “the most trusted” position. However in a family business we cannot ignore that the most trusted advisor is often the spouse, the children or the parents of the owners.
The most trusted advisor, as a family member, is normally not the person who controls the bank account. This most trusted advisor is typically acting with the power of veto for every large business decision. And it is the role of a tax accountant to simply identify who is the most trusted advisor and meet them.
We are all aware that the baby boomers are retiring. As a tax practitioner we tend to attract clients who are either 10 years older or 10 years younger than us.
If we are not understanding the next generation in a family business is important, valued and appreciated the likelihood of you maintaining the client through a transition is very low.
Preparing the next generation
We know from studies that 70% of wealth transfers fail one generation. And we also know that 24% of wealth transfers fail simply because the heirs are not prepared for the transfer.
An accounting advisor is ideally placed to engage the next generation and educate the heirs in terms of financial literacy and the management style of the current family business. This can easily be packaged into a range of services for a client. It can simply be a two hour session once a year for a family with limited wealth to a weekly, fortnightly or monthly meeting for sophisticated family businesses and large families.
We have often run “shadow boards” where the parents are not present simply to educate and inform the children about the operation of the business and the wealth within the family business.
Inheritance has obligations as well as a privilege
Getting extended families engaged in the governance of the family business and family wealth is a difficult task and can take many years of encouragement – especially for children in teenage years. A combination of professionals including lawyers, psychologists, accountants and mediators can be critical to ensuring that estranged family members will come back to the table to have a conversation.
As part of that engagement an accounting practitioner, together with the extended collaborative advisors, can articulate the purpose of a family. They can also give clarity on the roles and expectations of different family members and how they can, and should contribute to the family business and family wealth over time.
Professional accountants are well placed to understand the nuances of the family business and the values of the family. The clear articulation of values and expectation management among family members is a next step in the advisory offering.
Detailing the three circles
The governance of a business is relatively straight forward. A business has employees and owners – and sometimes employees are owners.
However a family business has the added complexity of family. So a family member can be an employee, an owner, an employee and owner or nothing.
Each role is important. The commencement of “job descriptions” can start at a relatively straight forward level. There can be a discussion on social media, dealings with employees in the family business and an expectation of attendance at family council meetings.
An accounting practitioner is ideally suited to start a family consider these elements and create a platform for more sophisticated elements as time progresses.
Your client is the family
It is important to note that a healthy family will argue. And as a tax accounting practitioner you have a clear obligation to the family – you cannot act for the person with the bank account to damage members within the family.
While such actions can lead to a short term gain from the matriarch: the long term impact will come back and reflect badly (normally with the termination of the relationship).
An engaged practitioner, with a focus on the family in a business can add considerable value beyond tax advisory alone. Anybody who ignores the family is simply do a dis-service by their client and is missing an opportunity to generate high value fees.
I created an advisory business from a family business. And my ongoing involvement in my parents 3 gen family business, which eventually grew into a business of 190 team members, plus my experience at building a business gives me a unique focus.
That unique focus is reflected into our practice. At Westcourt Family Business Accountants we only focus, and we only assist family owned businesses.
Keeping the focus on one target market has given us a deeper insight into how families work think and act. It is the only thing we do and we love helping families in business create a legacy.
Our mantra is that "Westcourt Makes Family Owned Businesses Great". We do it through increasing your after tax cash reserves, giving you an exact understanding of where you are at today so you can feel safe about planning for tomorrow, getting the family ready for managing the business and family wealth over time and protecting the current family assets from outside attack.
You are welcome to come to our website at www.westcourt.com.au and ask us a question. We are always happy to share our knowledge.