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Takeaways from the 4th Annual Family and Closely Held Business Summit

John Williams is a guest author and President of Scoville Public Relations.

What It Takes to Sustain a Family Business Through Multiple Generations

On October 25, 2018, Garvey Schubert Barer convened more than 90 guests to its 4th Annual Family & Closely Held Business Summit. Produced in partnership with Bader Martin, PS, BMO Capital Markets and Key Private Bank, the half-day event featured two keynotes and panels -- one comprising Pacific Northwest family-owned and closely held business executives, and the other consisting of a cross-section of finance, tax and legal advisors.

The first keynote was Mark Green, an internationally recognized family business consultant, speaker, author, educator and researcher, and the Co-Founder of the Pacific Family Business Institute. Mark noted that, for really the first time in history, there’s the potential to have up to six different generations working in the same family business – from the Greatest Generation up to Gen Z. The gulf across those generations is wider than it ever has been – from technology, to social mores, to business philosophy and ideology, which means it’s harder than ever to create alignment between the generations about what’s best for the company moving forward.

That theme – intergenerational differences was discussed throughout the rest of the day, especially by the panel of family and closely held business executives –all of whom were on the receiving end of a transition, including one who is not even a family member. The discussion began with the panelists sharing their personal stories of how they arrived at their current positions, and the conversation turned to issues and trends impacting their businesses. The panel included: Kim Hunter, CEO and President of Plymouth Poultry; Tom and Eric Campbell, President and Vice President, Operations (respectively) of Campbell’s Resort; and Jasmine Donovan, Executive Vice President and CFO of Dick’s Drive-in Restaurants, Inc.

A few key themes emerged:

  • Whether or not you are transferring a business to the next generation, you need to have your act together, which means having a solid business plan, audited financials, succession plans, and many other common business practices.
  • You need to build proper documentation and governance for everyone involved. It’s crucial to set expectations clearly, legally and authoritatively, so that everyone understands their role, their share, their responsibility. Doing so is one of the best ways to avoid downstream conflicts.
  • There’s a big difference between being an owner of the business and a manager of a business. It’s possible to work for a family business as a family member and not be an owner. It’s possible to work for a family business and not be a family member or owner, but have shares in the family business. Making sure people understand their role and responsibility is key to a smooth-running business as well as avoiding legal or emotional headaches down the line.

Advisors Panel: Key Factors to Consider When Transitioning or Selling Your Business

The family business executives panel was followed by a panel that comprised family and closely held business advisors, including: Diana Shukis, an attorney and Principal at Garvey Schubert Barer; David Stiefel, Managing Principal at Bader Martin, PS; Francis Brown, Director of Family Wealth Consulting at Key Private Bank; and Cameron Hewes, Managing Director, Mergers & Acquisitions at BMO Capital Markets.

The advisors panel took a 360-degree look at several different transition / succession scenarios, such as:

a) The owner wants to transfer the business but no one in the next generation is willing or able to do so;

b) The owner wants to sell because is no one willing or able to run the business in the next generation; 

c) The owner wants to transfer the business to the next generation, but there are multiple members with different abilities and interests in running the company

A few key themes emerged from a very robust discussion on the scenarios above:

  • First, everything takes longer than you think. You can’t treat a family business like a start-up. If you want to sell, it takes years to prep the business organizationally as well as through ownership and equity. Similarly, if you want to transition the business to the next generation, it takes years to deal with governance issues, training of family members, estate planning, and a myriad of other tasks. The same is true if you’re going to hire outside managers.
  • If you want to sell, the window is rapidly closing – values have likely peaked. You don’t want to sell in down market, which means you’re looking at a “hold” scenario for at least 3-5 years. Is your company set up for that? What tasks should you be doing between now and then to prep?
  • It was roundly agreed that everyone wishes they could sell a company at a profit or transition to the next generation without paying any taxes. It was equally roundly agreed that doing so is not possible. That’s where smart tax and estate planning comes in – there are ways to minimize the impact and that’s why you need outside counsel.
  • Last, the decision to appoint a board of directors was unanimously believed to be a good thing. Depending on family dynamics, including an outside advisor is particularly useful if there are known or expected difficult situations on the horizon. 


Applying Strategic Foresight to Disruption-Proof Your Business

The final keynote speaker approached the topic of succession planning from a different point of view –which is “how do you make sure you have a business to transfer in 20 years?” Author and Futurist Glen Hiemstra walked participants through a view of several megatrends that are shaping the world, and how business owners can – and should – be considering them when planning for their future.

The megatrends covered number far too many to list in this blog post. But suffice it to say: the population is getting larger and people are living longer, straining the planet’s ability to feed everyone and process the associated waste; computing technology, especially artificial intelligence and automation, is accelerating exponentially; biotechnology (aided by computing power) increasingly is able to replicate living organisms if not create entirely new ones; transportation – electric vehicles are already here, with connected cars and ultimately self-driving cars on the near horizon.

So, how do we benefit from knowing about these megatrends? Well, according to Glen, it starts by getting your strategy right. He noted that most businesses fall prey to searching for “a more efficient past” rather than an entirely “new future.”

He recommends really doing a deep dive on future trends and the capabilities and strengths of a business to scope out three different views of the future: what’s possible; what’s probable; and what’s preferred. From there, you need to be thinking a few steps ahead as to what’s needed to get your company to the “preferred” state, knowing that it doesn’t happen overnight. Glen calls this process “Strategic Foresight.”

And knowing the difference between strategic planning and strategic foresight could be the difference between having a company to pass down in the next generation or not. 

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Garvey Schubert Barer’s family-owned and closely held businesses practice group comprises strategic advisors and core practitioners who understand the intersection between law and the unique challenges of running a family business. With more than one hundred years of combined experience, our family-owned and closely held businesses practice offers clients extensive resources and a knowledgeable team of family wealth advisors across the Unites States.
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