expecting the unexpected in family business transitions

Expecting the Unexpected in Family Business Transitions

XPX Metro DC | January 16, 2014

Certified Family Business Advisor via the Family Firm Institute

Founded the Greater Washington DC Family Business Alliance

Introduction

Family Business Primer

Families – Who’s not dysfunctional?

Let’s throw money into the mix!

The Family

or

The Business

What’s More Important?

Family Wealth: Keeping It In the Family

Financial Capital Human Capital Intellectual Capital

The financial capital is used to enhance the human and intellectual capital of the family (and vice versa).

The bigger question is “How do you perpetuate family wealth?”

Family Wealth: Keeping It In the Family

Financial CapitalHuman Capital

Intellectual Capital

Owner dies unexpectedly Heir apparent dies

unexpectedly Unexpected disability

What Are Some of the Common Issues?

Substance or gambling abuse

Fraud – stealing from the business (family)

Kids either don’t want or can’t handle the business

Market changes (windshield wipers)

Siblings don’t want to/can’t work with each other

One sibling wants the “whole enchilada”

You get the proverbial offer you can’t refuse

Catastrophes/crises

What Are Some of the Common Issues?

The Godfather

It’s a Wonderful Life

Mondavi

Examples

GovernanceAdvisorsTransparencyCommunicationSuccession Plan

What Can We Do?

Qualified top management

Capable board of directors that includes outsiders

Family council

Constitution (a bit more on this later…)

Governance

Traditional – legal, CPA,

financial

Other – business

valuation, who else?

Advisors

Financial

Decision-making

With whom? All Principals

Transparency

Communication

Different from Transparency. Involves emotions and

expectations.

Important on multiple levels

The Single Most Important Thing!

Should Not

Address only one scenario

Simply be what you want

Should

Be revised/revisited every few years

Succession Plan

Family Constitution

A family is no different than a country

International Family Governance by Barbara Hauser

Family Wealth – Keeping it in the Family by James E.

Hughes

Perpetuating the Family Business by John L. Ward

Generation to Generation by Kelin Gersick, et. al.

Family Business, Risky Business by David Bork

International Family Governance by Barbara Hauser

The House of Mondavi by Julia Flynn Siler

Recommended Reading

Preventing the unexpected is impossible. Planning is necessary!

Conclusion

Family Firm Institute

Annual conference to be held in Washington, DCOctober 8 – 11, 2014

Questions, Conclusion

Contact:Geoffrey Brown, CPAbrown@bbcpa.com301-272-6040