Communication, Estate Planning, & Legacy: Managing the Complicated Dynamics of Owning a Family Business
The Trump Organization may be the family business that garners the most attention in the news these days, but it’s not the one we’ll focus on here.
I’ve always been struck by the number of families in the veterinary profession: practices that include parents, uncles or aunts, siblings or cousins in their management or ownership structure. Maybe this isn’t surprising: children are nearly twice as likely to follow in their parent’s footsteps as to choose another occupation, and this steps up to nearly 20 times as likely when you compare daughters of doctors (see the General Society Survey, where we’re too small to generate meaningful statistics on our own).
This generational commitment is a source of strength for the profession and reflects the mission-driven perspectives that nourish and sustain us. In the current environment, however, practice valuations and corporate inroads can present new problems for that intergenerational transfer of practice control.
I’ve had the opportunity to talk to a number of parents whose children are practice associates in the past few years. It’s been interesting to see how the size of the check that a corporate consolidator is willing to write has affected the conventional family dynamic. Deserving a piece of practice ownership due to your status as a son or daughter or through sweat equity can start to look like a gift too large to comfortably make as a parent.
This feeling can be complicated by the usual parent-child dynamics. Parents don’t want to give up control and primacy in their business, even if they’re slowing down and want to spend more time away from the office. Their child may be reluctant to make demands to be given more responsibility, especially if they feel unready to take on additional business roles. It can be easier to let Dad or Mom run the business when you’re overcommitted at work and home and concentrate on your clinical duties.
When the time comes to plan an exit strategy, the child can seem underprepared to manage a busy practice and uncommitted to the responsibilities of ownership. In addition, I’ve seem practice owners of all stripes start to re-evaluate their personal values when that large check looms. What to do?
As in so many family issues, opening avenues of communication early is a good place to start. Conversations around money are difficult in our society but are especially critical here. A frank discussion of goals and personal values should also include personal perspectives on money, security and achievement, as well as family and legacy.
For the child interested in ownership make plans to acquire the knowledge base required to run a practice. Take on tasks that can both add value to the practice and decrease the burden on the parent. Save up for a down payment or be clear about your sweat equity contribution.
For the parent owner, you should be thinking about this scenario from the moment your child is accepted to their veterinary program. It’s a high honor to you to have your child want to follow in your footsteps, even more so when they want to come and work in the practice you’ve built. Share practice financial data. Help them prepare for the next stage in their own career, as a practice owner.
If you’re thinking about gifting part of the practice to your child associate, also think about children who aren’t veterinarians or otherwise involved in the practice. The practice may constitute a significant asset in your estate – how do you treat all of your children fairly without accepting that big check, and essentially liquidating the business?
In the process of weighing each of these variables it can be difficult to find solutions that satisfy all of them. The co-ownership model (like VPP’s corporate-doctor joint ventures) can offer an effective way to meet many of the goals of each generation: cash for the older generation, support for rookie owners and a way to secure veterinary ownership for the practice.
There’s a way to build a legacy beyond a big check – by building a stronger family business – and for veterinary families it’s never too soon to start planning that future.
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