Tuesday, July 10, 2018
Advisory Boards are frequently controversial. While an Advisory Board may not be the answer to end all questions, they can be a powerful tool to support a business family in building their legacy, growing the ROI, building innovation, forming new business networks, and developing key strategic initiatives. To accomplish these objectives requires a properly structured, properly staffed, and properly executed Advisory Board.
For many family business owners or entrepreneurs, there is resistance to implementing an Advisory Board for many reasons. Sometimes, they don’t know how to get started. Sometimes, they see that too many boards are simply ineffective or, worse, dysfunctional. Sometimes, they are wary for other reasons: Fear of losing control; Difficulty identifying and recruiting board members; Unengaged board members; Uncommitted board members; Boards can be expensive and time-consuming.
An Advisory Board should always provide value to the family, the business, and to the leader of the family business. While all serve at the pleasure of the CEO, the Advisory Board members are selected for their experience, insight, wisdom, ability to ask the right questions, commitment to the success of the family business, and ability to be a focused sounding board for the CEO.
Creating an Advisory Board is an important step in the life of the family business. The timing around assembling an Advisory Board is dependant on the company’s needs and objectives. To have the greatest impact, the Advisory Board is to have an impact on the vision of the company. As business owners are frequently working ‘in’ the business, the Advisory Board forces the owners to work on the business – the big picture vision – which should lead to sustainability and new revenue growth.
The professional Advisory Board ensures a healthy, functioning, and effective board that addresses the concerns of the business owners. The CEO maintains control. The business has a team of qualified, committed advisors providing invaluable advice for less than the annual compensation of a senior executive meaning it is a very cost-effective way to gain insight. The benefits of a professional Advisory Board is with strategic experts who are committed to your organization without the headaches of building (and maintaining) a full board and without the looming threat of board dysfunction.
Too often, growing, privately held companies get stuck and don’t take advantage of the invaluable resource an Advisory Board can be.
Let’s talk today about how we can provide a professional Advisory Board tailored to your business to help you lead for the future.
Tuesday, June 19, 2018
Getting married. Having a child. Purchasing a home. Starting a new venture. You don’t go into these significant changes in life without some forethought and planning. Significant transitions require preparation.
Preparation for significant transitions in a family business is no different, whether it is a transfer of assets, transition of ownership, develoment of the next generation for leadership, or fostering sustainable business leadership.
How frequently do family business leaders secretly wonder: “Are we ready? What are we missing? What have we not adequately addressed?” For families in business, there are two unavoidable issues that arise: (1) maintaining a strong, viable enterprise; and (2) keeping the family committed to and capable of leading.
To be successful as the family and entrprise grows requires preparation in critical categories:
1. Family:Preparing the family enterprises to survive long term means living family values, discussions of who the family is, how they act as a family and nurtuing relationships in the family.
2. Enterprise Ownership:The family avoids conflicts of interest or self-serving decisions by clearly defining boundaries, policies, and shareholder agreements.
3. Enterprise Governance:Sustainable family enterprises have strong governance that closely monitors performance and compliments the family’s knowledge, skills, and abilities with strategic perspectives of qualified outsiders.
4. Wealth Managemet:By diversifying risks and providing liquidity opportunities, successful wealth management helps preserve harmony and goes beyond the core holdings or legacy enterprise.
5. Philanthropy:Charity is an important element that can unite the family and the enterprise. Sharing wealth, as an act of social resonsibility, can unite the family and demonstrate core family values to the next generation.
Many companies begin as family businesses, but only those that do the hard work of continuous planning and preparation for the future will endure and prosper as a family business in the future.
SKM Associates is able to walk with your family and help guide the important work of planning, preparing, and implementing.
Tuesday, May 22, 2018
“You got to be careful if you don't know where you're going, because you might not get there.” Yogi Berra
If you don’t put together a plan to accomplish something, there is a good chance you won’t attain what you want and need to. That could not be more true in the area of exiting a family business. Research shows that many business owners just don’t ever plan on leaving their businesses or believe that there will always be a tomorrow. What are the excuses for not planning the exit?
A. “It is too early”? -- You should start planning 3 -5 years before you
leave your business.
B. “Too complex?” – Yes it is! That’s why you need help. Exit planners
work to coordinate the work of your advisory team.
C. “Too time consuming? -- Yes, if you do it alone. Again, exit planners
will do the planning and coordinating of the work to be done.
1. I have a specific, written plan as to when I would like to exit my business and move to the next phase of my life.
2. I am becoming bored or tired or feel physically stressed with the daily operations of my business and do not feel the same sense of positive energy or enthusiasm I once had.
3. I have a specific, written plan as to how I will productively spend my time when I am no longer running the business.
4. I am excited about the changes and opportunities that await me outside of running the business on a day-to-day basis.
5. I am ready to move on to my next adventure that does not include the business.
6. Considering my current feelings about the business, running this business for another 3- 5 years seems like an eternity.
7. I have coasted the last few years to avoid the aggravation and work needed for business growth.
8. I am confident in my ability to transition my current responsibilities in the company to the people I have prepared for future ownership and leadership.
9. My vacation time and time away for the business has been increasing each year and when away, it is easier for me to not ‘check-in’.
10. I have a good understanding of the legal and tax implications for a business transition and I am ready for these aspects.
1. I have a specific, written plan for how I would invest the cash I would receive upon my exit of the business.
2. There are qualified professional advisors in my life that help in developing my future financial plan.
3. The value of my business is a large / critical part of my future financial security.
4. I know my anticipated life style and have adequate liquid assets to offset any loss of personal benefits I have received while in the business.
5. My business value is less than one-half of my total net worth.
6. There is a specific written plan to turn my business holdings into cash for my retirement.
7. Excluding Social Security, I have sources of income to fund at least one-half of the needs for the lifestyle I desire to live when I leave the business.
8. For the last 5 – 10 years I have saved at least 15% of my annual income.
9. I have completed the legal documents and purchased insurance products to provide for my family in the event of an unexpected or catastrophic event in my life.
10. I have begun to execute my plan to eliminate any personal debt in the next 3 – 5 years.
An Exit Strategy includes the written goals for the succession of business ownership and control, derived from a well-thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and a time period that works best for the business, its shareholders, potential buyers, and Family.
Tuesday, April 17, 2018
During the past several years, family businesses are finding the depth and bench of their leadership talent may not be what it had been. What can families in business do to intentionally develop the next generation and nurture better owners? As the Baby Boomers plan the transition of the business to the next generation, families must intentionally help the next generation grow and develop. The potential talent pool already knows and understands the family culture. The investment is truly building the legacy and looking to the long-term as the next generation is nurtured.
So what are a few intentional ways to develop the next generation?
1. Continue to develop yourself: As a leader in your family, you set the example. Seek to learn and grow at whatever stage of life you may be. The more competent you are, the more likely people are to trust you. Developing oneself influences relations with others, motivates others, and inspires others.
2. Carefully select learning projects: Everyone has areas of growth opportunity. Take time to analyze what the business will face in the future and intentionally have the next generation take responsibility for beginning the investigation or data gathering of what and how the business can address the issue. The opportunity to learn the business, craft analysis and presentations will help the next generation face future business needs.
3. Utilize 360 Degree Feedback: This feedback can prove invaluable to gain deeper insight into how others view them. Many times we don’t know what we don’t know, and that is what can create bigger problems for the next generation later on. This can be a very valuable learning opportunity, BUT IT MUST BE DONE VERY CAREFULLY.
4. Build exposure to other leaders: Broaden the opportunity of the next generation to network with seasoned leaders of other Family Owned Businesses. This often may be the opportunity through involvement in trade associations, Family Business Forums, or the local Chamber of Commerce. Either way, it must be intentional.
5. Exposure to the Strategic Agenda: Invite the next generation to sit in on the planning discussions for the next business cycle. Do it now, before they will be expected to make the decisions. Show them your thought process. I know one business family that has rotating seats on their Board of Directors for the next generation.
6. External Coaching: Sometimes our children hear things differently, more clearly, and more receptively from an ‘outsider’. The Coach must understand the issues and concerns of a Business Family, be committed to the success of the next generation and the legacy of the business, and have the ability to both push and pull the next generation along in their learning process.
What has or is your Family intentionally doing to develop the next generation of Family Leaders?
Let us know, we would be delighted to include it in the future.
Wednesday, March 14, 2018
The Challenge. Leadership is lonely. Navigating the organization from where you are to where you want to be is hard. Knowing where exactly you should be going can be even harder. Large, publicly traded companies have the benefits of expensive, fiduciary boards providing oversight, expertise, and feedback. Well-funded start-ups and VC- and PE-backed operating companies have private boards with experts helping leadership guide the organization. Many leaders at family businesses and closely held organizations, however, are starving for input from others with outside experience and expertise, with fresh ideas for their organizations. Even the best leaders, leaders who have great vision and skill, are sharpened by the feedback of other experienced leaders.
As businesses grow, leadership and governance need to evolve. As Marshall Goldsmith says, “What got you here won’t get you there.” What growing organizations and leaders need is an efficient team of strategic experts who are committed to the organization and its leaders. They need a team of highly qualified leaders providing honest feedback, offering outside perspective, and helping leaders navigate the way forward.
The Resistance. Many business owners and leaders, though acknowledging how valuable it could be, too often resist creating boards for a number of legitimate reasons. Sometimes, they don’t know how to get started. Sometimes, they see too many boards that are ineffective or, worse, dysfunctional. Sometimes, they are wary for other reasons: fear of losing control; difficulty identifying and recruiting board members; unengaged or uncommitted board members; uncertainty regarding the cost in both time and financial investment.
Invaluable Advice. SKM Associates offers a full service professional advisory board solution. We do the work of advisory board creation and implementation, and you focus on using the strengths of a healthy board to drive your organization forward. We work with you to compile a multi-disciplinary team of experienced professionals as an advisory board that is tailored to work for you. You get access to the same expertise as larger companies, at an accessible cost, tailored to your organization, and committed to your success.
Your advisory board comes to you with, among other benefits, quarterly meetings, monthly reviews, support in monitoring key performance indicators, connections to additional resources and new networks, and more.
What is holding you back from the invaluable advice that will help you drive your organization to continued success?
Tuesday, February 13, 2018
It is no secret that each generation of a family owned business faces unique challenges. It is also no secret that the majority of businesses are family owned businesses. Yet, for many, the term family business can conjure up stereotypes of family squabbles, mom and pop shops, nepotism, and lack of sophistication. While there are businesses that fit some (or all) of those stereotypes, it is our experience that these stereotypes are not an accurate description of many family owned businesses. Indeed, we continue to see many family businesses that are thriving, growing, and using their family ownership as a long term competitive advantage.
Keeping the family in the family business is not easy and does not happen by chance. It requires hard work, commitment, and accountability. In our work, we have noticed several themes that are common in successful family businesses. What are some of those themes that help family businesses sustain themselves for the long haul?
1) Retention of both family and non-family talent. Retention is nurtured through a level of trust, commitment to the vision, and strong job knowledge. When a crisis occurs, regardless of prior squabbles, the team pulls together.
2) Wise financial management with patient capital. The family maintains a long-term time horizon utilizing patient capital and minimized debt. This is accomplished with a judicious approach to capital expenditures. Maintaining the concept of frugality allows the family, the business, and the ownership to be ready for the next opportunity and to weather the next downturn.
3) Openness and transparency. The family has a willingness to discuss sensitive issues with transparency and openness. Family members are willing to serve the family and business by frequently placing the needs of the family system, the business system, and the ownership system before their own personal desires.
4) Effective structures. There is commitment to systems, processes, and practices that provide the right structure for their family and business. There is a commitment to educate all family members and shareholders so there are minimal misunderstandings and minimal misaligned expectations.
5) Intentional development. Families in business that are committed to the long haul, consistently and intentionally set aside time to discuss and revisit the first four themes so they can keep up with changes in the family, the business, and the ownership. To implement these themes and subsequently revisit the themes with an unbiased eye, families in it for the long haul utilize unbiased, third party resources.
Well-run family businesses, in it for the long haul, stay focused on the things that will help them navigate the ever-changing challenges that they face.
For more information contact SKM Associates Family Business Consultants
Tuesday, January 16, 2018
Transitioning ownership of the family business can be tricky. Many times, when transitions are not successful, the root cause is the people involved, not business conditions. Having the right subject matter experts advise through the transition ensures that the family is structuring the transition for success, and having a family business advisor walking you through the process can minimize the sticking points, provide a calm for passionate emotions, and help maintain unity in both the short term and the long term.
There are some common themes in family business transitions that go awry: a senior generation that can’t let go (either business is going well and it is too much fun to let go or the business is struggling and the senior generation feels like they have to get it back on track); lack of confidence in the rising generation; indecision in selecting the next leader; avoiding difficult or awkward conversations; emotional identity in the business; or a rising generation that can’t work together.
For a successful transition, one of the critical pieces is giving voice to both spoken and unspoken concerns of those involved. For example, for an owner or founder, it is important to articulate his/her objectives in transitioning the business, plans for the next phase of life, and willingness to hand over the reins. The spouse of the owner also has concerns that need to be surfaced and addressed, which may range from a concern for financial security in the golden years to peace between the next generation to how the couple will spend their time in retirement. The rising generation consists of both those working in the business and those who have no daily interactions with the business (which in and of itself can be a source of contention) and has its own concerns that need to be addressed. There may also be blended families, or an unwillingness of one family member to take direction from another, or arguments over voting and non-voting shares, or other issues under the surface. The transition must also consider the concerns of key non-family employees in the business.
In order to navigate the pitfalls and help address the concerns of the many stakeholders, we believe it is imperative to have an independent third party family business advisor to help guide the transition journey. The team of subject matter experts that will help structure and execute the transition may consist of: a corporate lawyer who recognizes the client is the family and not one individual; a CPA who must provide the accurate numbers for current financials and future projections and tax implications for all family members; a Certified Valuation Analyst who will work with the CPA to determine the accurate value of the business; and an estate planning attorney who will make certain that senior generation’s plans are adequate and that the next generation’s estates are in position to accept the ownership.
A family business advisor is the constant thread throughout the process to help navigate the pitfalls, keep the expert advisors focused on the goals of the family, and help the family address the concerns of the various stakeholders. Don’t do this alone. Invite a family business advisor to help you navigate the journey.
Tuesday, January 2, 2018
To borrow from Charles Dickens’ famous opening in A Tale of Two Cities: Family businesses can be the best of times, and family businesses can be the worst of times.
When working well, family businesses can unite families, provide meaningful employment for generations, and create a tangible expression of a family’s values. Patient capital and utilizing the competitive advantage of family-ness can lead to outsized returns over generations. On the other hand, family businesses gone awry can ruin financial opportunity and tear families apart. What makes the difference? What can families do to increase their likelihood of fostering the “best of times” across generations?
Good family businesses understand and address the three systems that they face: the family system, the ownership system, and the management system. Families and family leaders that recognize and manage these three inter-connected systems have a higher likelihood of sustaining success, both as a family and as a business, over multiple generations.
These three systems are complex things, and the intersections of these interconnected systems can be daunting. For many leaders, addressing issues that impact both the business and family (for example, the need to terminate the employment of a family member) may be unsettling or uncomfortable. What is important to remember is that systems and families work because they interact in ways that are not easily quantified. Haveing the courage, as a family, to address the issues will help develop systems for sustainability.
Family businesses that survive for multiple generations need structures to help manage relationships and the inter-connectedness of the three systems. Family business leaders need to be proactive in finding ways to address the uncomfortable or difficult circumstances within all three systems. By developing healthy ways of addressing these issues, it will strengthen the potential for positive business growth. Oftentimes an outside resource can be effective in helping both the family leaders and the family in discovering ways to create positive solutions.
Figuring out what the issues are and how to address them is a challenge, but it is a healthy part of growing together.
As a family, to start the family conversation, check out 20 Questions Practical Checklists ForBusiness Families.
Monday, December 18, 2017
For some families that is a dreaded phrase and for other families that brings warm memories of family gatherings.
At a time of year when activities tend to outpace the number of hours in a day and the days keep running together, it is important to keep in mind that it is our families that make the season.
In this time of busy-ness, remember to take time for family.
May this season be one of peace, joy, and happiness as you intentionally seek family time.
From our family to yours,
Enjoy the blessings God has bestowed and may your family experience a prosperous 2018.
Steve and Aaron