Values-Based Business Succession Planning

August 09, 2022
Senior Wealth Planner Kerri Mast discusses qualitative matters related to business succession, focusing on the importance of family values.

Sigmund Freud liked cigars. However, he observed that love and work – not cigars – are the primary sources of pleasure in life. Love and work must be in balance in order for us to attain fulfillment. These two elements of our lives are connected in family businesses: If there is a breakdown or conflict in one, it will affect the other.1

Business owners likely have a variety of goals relating to the succession of their company. Conversations relating to this topic often revolve around business valuation, identification of a successor management team, mitigation of taxes and ownership structure. Focusing on these important aspects of business succession planning helps achieve tax and financial goals.

Owners also likely have a variety of goals when it comes to their family. Discussions relating to family are often nuanced and revolve around the appropriate amount of wealth to leave family members, the appropriate age for an inheritance, the role of philanthropy, the strategy for fostering the development of financial acumen and the importance of maintaining interpersonal relationships.

Whatever an owner’s goals for his or her business and family may be, achieving both sets is an exercise in balance.


As an example, consider a business owner, Bonnie, with three children: Andrew, Ben and Claire. Andrew joined the family business immediately after graduating from business school. He enjoys management and logistics and has worked closely with his mother in making critical business decisions. Ben enjoys photography and, other than taking a few headshots of his mother and the other executives, has never worked for the company. He currently spends most of his time as a freelance photographer. Claire spent several years as a marketing professional with other firms but rejoined the family business a few years ago. She leads the business’s marketing strategy but has expressed no interest in growing her role within the company.

Bonnie has a good relationship with her children. She has encouraged and willingly supported them in the pursuit of their respective interests, and her business success and willingness to engage in lifetime tax planning has allowed her children to make choices based on passion – not just economics. Like many parents, she is committed to treating all of her children equitably.

Bonnie has begun to think about the succession of her business, which she built from the ground up. The company has provided a consistent source of income and a meaningful store of wealth for her and her family. In addition, she believes that it is poised for continued success and is excited about the next phase. She knows that the continued success of the business depends on the identification of an appropriate successor management team.

Given their divergent interests and experience, involving all three of the children in the company may present certain challenges. Bonnie desires to treat her children fairly, so she gives each a one-third interest in the business. She appreciates the contributions both Andrew and Claire have made. Given Andrew’s broader experience, Bonnie believes he can effectively manage the business through a change in leadership and grooms him as her successor. Bonnie believes Claire will continue to contribute importantly to the business as well and that she should have a role on the management team. Andrew and Claire will receive compensation for their contributions. Ben, while not involved in the business from a managerial perspective, will enjoy the company’s success while continuing to pursue his outside interests.

This result, though seemingly logical and thoughtful, could potentially create challenges. For example, Andrew and Claire may feel frustrated that Ben gets one-third of the business, as well as one-third of the upside, while he is not contributing to its value via sweat equity. The two might push for increased compensation, which Ben may wish to limit to increase the profit in which he shares. And Ben might feel like an outsider and excluded from the working relationship his siblings share with his mother. It is not difficult to see that this arrangement could be detrimental to family relationships and potentially bad for the business.

What is a business owner to do? The statistics regarding the failure rate of family businesses are staggering. The majority of family businesses do not have documented succession plans, and it is estimated than only one-quarter survive into the next generation. As owners think about the succession of their business, they should consider looking beyond the numbers. In addition to the important quantitative aspects of business succession, consider the qualitative aspects of business succession too.

Values-Based Succession

When engaging in business succession planning, owners will go through a process of identifying a competent, interested successor; this is often arduous and occurs over many years. Owners should consider who among the possible successors has the aptitude and interest to step into their role should the need arise. They also should determine whether sibling groups or other management groups have experience working in collaboration and whether potential successors have demonstrated necessary skills in financial management, operational planning, personnel management and analytical decision-making.

As business owners consider transitioning their business in the context of a family relationship, they may wish to determine whether the values of their successor and other stakeholders align with their own. Successful family businesses tend to adopt the family’s values.2 To that end, it may be helpful for business owners to reflect on their values and principles, particularly as it relates to the future of their family and company. Clarifying values can help families establish a vision that can align the family and the business, which can serve as a beacon as decisions are made.

As owners reflect on their values, they may wish to consider:3

  • What values drive decisions in their business?
  • What values drive decisions in their family?
  • What values do they hope wealth will promote in their family?
  • What principles guide their thinking about inheritance?
  • Who was the greatest influence on them in developing their principles?
  • What principles seem to guide the lives of their family members?
  • What are the benefits of leaving a business of substantial wealth to their children or other family members?
  • Could leaving a business of substantial wealth be a detriment to their children or other family members?
  • Do their family members have the judgment and skills to use inherited wealth constructively?

Business owners should consider casting a wide net in terms of who in the family is included in the conversation relating to values – potentially including even those family members who do not have a role in the business. During these conversations, family members – even those who are more reserved or hold unpopular opinions – should be encouraged to share their points of view. Owners should recognize the existence of multiple viewpoints and the challenge in working toward a solution that works for both the family members and business. Importantly, they should try to ensure every person feels heard. A family member who feels that his or her viewpoint has been heard may feel more invested in the plan and willing to work toward a solution, ultimately minimizing family discord. Points of conversation for family members may include:

  • What are your most important values and principles?
  • What are your passions in life, and how can we invest in them?
  • How would you think about the purposes the family business might serve in your life?


As business owners balance the company’s needs with their goals for their family, they may find there is not a perfect solution. The desire for the business to be successful might conflict with their desire to treat their family fairly; they may not be able to achieve equality among their children, and the children could be unhappy with certain aspects of the business succession planning. Some element of friction may be unavoidable as owners strive to bring into balance the elements of family (love) and business (work). However, thoughtful conversation regarding their guiding values may minimize discord among family members and increase the likelihood of a successful transition for the business.

Your Brown Brothers Harriman wealth planner would be pleased to meet with you and your family to discuss your business succession goals.

1 Source: Carlock, Randel S., and John L. Ward. When Family Businesses are Best: The Parallel Planning Process for Family Harmony and Business Success. (Palgrave Macmillan, 2010).
2 Source: Carlock, Randel S., and John L. Ward. When Family Businesses are Best: The Parallel Planning Process for Family Harmony and Business Success. (Palgrave Macmillan, 2010).
3 Adapted from Charles W. Collier’s Wealth in Families. (Harvard University Press, 2006).

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