Panelists Frederick Lipman and Nancy Drozdow will discuss their experiences with family business exit planning involving the next generation.

Every Family’s Business by Tom Deans

This book is the relating of a colorful conversation between two fictional owners who recently sold their respective businesses who meet on a flight to Barbados to invest their proceeds.  One sold his family’s insurance business twelve years after taking it over from his father.  The other sold his furniture manufacturing business after years of fighting with his son, daughter and wife.

The book’s best passage: “(Lay out) a process…that keeps the family members in the business focused on the goal of selling the business at some point–selling the business at the highest price to the highest bidder, giving preference to cash and without prejudice to whether the buyer is family or an unrelated third party.  The stock of the business must always be understood to be for sale.  Sale of the stock takes primacy over any consideration of family employment.  And family employment will not alter or distort the value assigned to the stock.”

Putting the business first.  Brilliant.

The great aspect of this event is that the moderator will kick off by asking, “What would you do if you, as the business owner, had six months’ notice that you had to sell immediately (maybe because you were going to die?)?”  What a great perspective! (aside from the dying part…)

Here’s what I think:

Human Capital:

· Are there successors to take over for you in your company?

· Do these successors have employment contracts that will make them want to stay with the company?

Structural Capital:

· Do you have a will?

· Are all the key processes in your operation written down?

Relationship Capital:

· Are your customer relationships secured with long-term contracts?

Strategic Capital:

· Do you have life insurance?

· Is your family cared for financially?

· Do you know the value of your company?

· Are you prepared from a tax angle?

· Is your company prepared and attractive for potential acquirers?

· Could your company survive a rigorous due diligence process?

I’m sure there will be many great ideas and recommendations from the other panelists and in questions from the audience. I’ll be taking notes along with everyone else attending.

This breakfast meeting will focus on the transitions that families undergo when they sell their businesses, the challenges they face andhow they can prepare. Our panelists include Amelia Renkert-Thomas, Scott Wakeman and Gretchen Davidsen. Amy, Scott and Gretchen together will discuss the differences between running an operating business and a family office, or family investment vehicle, and how to effectively structure and manage a family office to maintain control.

Part of what makes a family businesses unique could be that they simply have a different set of priorities. While many companies place ahigh value on growth and current profits, family businesses consider other values of high importance. For example, many family businesses consider the value of the family business to the fiber of the family. This business can serve as a source of employment for family members andit can serve as a means of keeping the family connected.

This unique set of priorities can be very productive- allowing a company to really focus on building value for the long term. But it can also cause problems, especially if a skill set is missing within a family and they refuse to go outside for help. Family businesses also have unique challenges compared to traditional business – family tensions anddynamics have a way of spilling over into the business causing fissuresand counterproductive behaviors.

I’ve seen both the positive and negative sides of family businesses. In my opinion, the secret is to not pre-judge a family business based on “traditional” business practices. Rather, start with an open mind andtake the time to understand the business, the family and then their relationship together. It is also vital that you are ready to confront the family when their behavior becomes a problem for the business.

This thinking requires specific training in issues facing family businesses -which is why we have included this in the curriculum at XPX. If it’s done right, a family business has a lot to teach American business people who have lost the ability to think long term.

Former owner and now family business advisor Scott Wakeman, told this joke at our first Owners Academy session at last month’s Exit Planning Exchange (XPX). At this event, owners were invited by XPX members to hear other business owners talk about their various experiences in owning, operating and exiting their own businesses.

Another former family business owner, and now investment banker Andy Crain, explained how his family was somewhat insular and less inclined than other companies to get good outside advice from a board of advisors. This is actually common with family businesses – to keep it ‘inside’ and figure it out without help from the ‘outside’.  Luckily, Andy isa smart guy and was able to lead the family business out of trouble, but some family businesses aren’t so lucky.

Maybe not everyone would find Scott’s joke to be that funny. But I think it proves the point that family business is such a unique and special entity. You can understand business, but that doesn’t mean you understand the first thing about a family business – so maybe it’s safer to consider this an inside joke. ]]> http://trekconsulting.com/2010/11/17/family-business-and-a-joke/feed/ 0 http://trekconsulting.com/2010/06/13/the-role-of-financial-executives-in-exit-planning-for-business-owners/ http://trekconsulting.com/2010/06/13/the-role-of-financial-executives-in-exit-planning-for-business-owners/#comments Sun, 13 Jun 2010 15:38:03 +0000 Michael Oleksak http://trekconsulting.com/?p=921 Financial Executive magazine published my article, “The Role of Financial Executives in Exit Planning for Business Owners” – April 2010 – Mike Oleksak

The answer actually depends on what other planning the business owner has or has not done. For business owners not to have an exit plan may be understandable, given that many owners today are busy fighting day-to-day problems and may find it hard to focus on the next phase of their life. However, even if the owner does not want to acknowledge their mortality or life after running their business, there are a couple of vital documents every business owner needs to have in case they get hit by a bus or struck by lightning and leave this world in a hurry.   Mike Oleksak   2009

In this month’s Vanity Fair, with Gisele on the cover (I only buy it for the articles…), there is a good article about the New York Times family that has owned the paper for five generations.

Fifty-seven year old Arthur Sulzberger is the fifth generation of family ownership of the Times. The article makes two observations early on, “ America is not kind to the heir. He tends to be depicted as weak, pampered, flawed, a diluted strain of the hardy founding stock”. The second is that, following many disastrous decisions, while many people hope Sulzberger succeeds, few think he will.

In the Boston area, this topic is especially interesting because the Times bought the Boston Globe in 1992 for $1.2 billion. The Globe may close down this week (meaning zero value) if significant concessions from the unions are not negotiated.

Read the article.