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 Capital

Human 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

– Governance– Advisors– Transparency– Communication– Succession 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