Family Business or Family Feud? Excerpted from: Planning a Family & Business Legacy Learn More

The land my family currently lives on is part of what was once a nine thousand-acre ranch, perched above the shimmering California coastline. A successful ranching operation, owned by a single family since 1882, was lost after a 20-year legal battle that tore both family and ranch apart. Had the family been able to successfully plan for its continuation, cattle might still be grazing on the spot occupied by our house. You might say our home is testimony to the consequences of lack of communication between the owners and heirs of a family business.

Not far away, another family feuding over a business, resulted in land baron Clarence Salyer losing control of his empire when two of his sons rebelled and forced him out of power. To this day, the family is still split into two irreconcilable factions. About the only time the remaining Salyers get together now is for periodic courtroom sessions.

The case of the Fairview Dairy is another example of a failed business transfer plan.

Fairview Dairy is a successful dairy farm owned and operated by Peter, a first-generation American who came to this country as an immigrant with no formal education and no assets, save his willingness to work hard. Over time, Peter's hard work and excellent management skills resulted in his developing a high-producing, quality milk operation. After many years, he built up a multi-million dollar dairy business. As he got older, Peter decided to bring his son, Tony, into the business with the goal of eventually passing the business on to him. Unfortunately, Tony had other ambitions.

In a private meeting with Tony and his wife, Patty, I learned that their interests were quite different from Peter's. Their dream was to start a small dairy operation of their own in another state. Although Peter couldn't understand why Tony didn't share his vision of keeping the dairy in the family and building even greater production and profitability, he nevertheless helped Tony start his dream operation by giving him enough cows to get started. Tony and Patty moved to another state and began building their dream dairy operation.

The point of this story is that the vision of the second generation may not match that of the entrepreneur when it comes to the future direction of the business. It's important that this be understood in order to avoid a lot of pain down the road. The only way that can happen is if there is open, honest communication among family members when it comes to dealing with matters of the family business.

Having worked with business owners for years as an active estate planner, I dealt with many cases like Fairview Dairy. Businesses that could have-perhaps should have-survived to enrich new generations of family owners, but instead, were liquidated or sold to others outside the family. It's sad that lack of communication among family members and failure to plan can have such drastic results.

The fact that family businesses were so often lost with family relationships damaged in the process caused me to reflect on the type of planning most family business advisors offer. I came to the conclusion that something was missing. Somehow, "family" had been dropped from "family business planning." I resolved to do something about that.