How to Exit the Family Business — Without Exiting the Family

The “family” dynamic in a family business has the potential to make a company great and undermine it at the same time. Even when things seem like they are going well, complex, underlying issues among family members can eventually lead to someone deciding to split from the business. If you’ve read the tabloids or have been near the internet in the past few months, you’ve likely heard a famous example of this: Prince Harry and Megan Markle are exiting the most famous family business on the planet — the British Royal Family. For a variety of reasons, the pair has decided they would be better off being family members, not “Royal” family members. The story makes for great drama, but it’s a pretty common occurrence in family businesses.

Every family has conflicts. When those conflicts come in a family business, though, they can escalate quickly. Without a resolution of these issues, there inevitably comes a time when a family member decides to leave — or is forced out of — the family business. Too often though, the issues that force a family member to leave the family business spills out of the “business” and into the “family,” negatively impacting the ability for the family to coexist as it did before.

There are, however, plenty of ways to soften the blow and create amicable exits that don’t result in resentment — and it starts by identifying the reasons for the split. As a family business consultant, I have recently seen the same three situations that lead to a child leaving the family business come up over and over.

• They lack the necessary technical skill-set: Sometimes, the heir to the business lacks the technical skill-sets or leadership acumen to realistically take over the business, which creates an incredibly difficult situation for everyone involved. But if a business owner has a child who can’t handle the responsibilities, they have a responsibility to their family and their employees to go in another direction.

• They don’t like the business — or working with their parents: “Like father like son” is a popular saying — but it’s not always the truth. Many children simply aren’t like their parents. They might not have the same interests or passions and might not want to follow in their footsteps but feel a sense of duty to do so. Some of these adult “children” have described to me that they feel “trapped” in the family business. Eventually, though, everything predictably falls apart, and a split is imperative.

• The parents don’t like working with the child: Parents generally have the best intentions for their kids, which can blind them to the fact that they might not enjoy actually being their parent and working with them. And the feeling could be mutual. This often occurs when work styles and values between the generations aren’t aligned with realistic expectations.

Handling the Inevitable

In the situations described above, a split from the business is the only real solution. After that decision is made, however, is when the hard part starts. But if executed the right way, a split can be relatively painless — and good for everyone involved.

Have an exit plan

Having an exit plan in place long before an exit is necessary will help smooth the situation significantly. No one wants to feel trapped by unspoken obligation or fear. Creating an exit plan will temper those feelings and give family members an easier “out,” should either part decide it’s necessary. It also lays out a plan to execute the exit, which reduces the stress on the situation even more. These governance rules are essential to a family business — and to the family.

Communicate often — and with emotional intelligence

Constant, clear and honest communication is essential in these situations, but the communication style is what matters most. Family members cannot speak to one another at work in the same way they do at home. All parties must maintain professionalism at all times when it comes to business matters. If you wouldn’t say it to a nonfamily employee, don’t say it to your parent or child. Most importantly, though, both parents and children in a family business must act with emotional intelligence when communicating with each other. They must be able to see things from the other person’s point of view.

It might take several conversations (and a few tears), but communicating the right way, eventually, will allow that person to exit the family business gracefully — and keep the relationship with the family intact.