Case Study

Transitioning a family business takes more than occasionally saying in passing “someday this will all be yours.” As soon as the next generation enters the business there must be a focus on assessing desire to own and lead in the future, along with specific milestones that, when achieved, trigger transparent and agreed-upon progressive steps toward formal transition. The rising generation also needs opportunities, as earned, to take on increasingly more responsibility and to have input into strategy. Active development, frequent communication and trust-building behaviors are essential. It is often critical for the senior generation to develop interests outside the business that has taken most or all of their time for many years.

The family consists of dad, mom, son and daughter. Forty years earlier, the father left a successful and lucrative accounting career with a large firm to take a risk on a creative idea he fell upon accidentally. While watching his clients move to bigger and newer office space, he believed that there was demand for more stylish, quality, yet reasonably-priced office furniture. After leaving his firm with the support of his wife and struggling through some lean years, he connected with manufacturers who were able to meet his requirements for style, quality and price and he began to quickly grow sales beyond what he imagined.

The couple had a son and then a daughter who both attended university. The son went to a prestigious business school, received an MBA, and worked for a well-known consulting firm for ten years. The daughter went to art school and taught art classes full-time. When the business hit hard times about ten years prior to Jeff being brought in, the son quit his job and worked without pay for two years to help the business survive. Along the way the father promised his son full ownership to be completely gifted as appreciation for working for nothing initially and helping to reinvigorate growth. The daughter took a role after her brother, when she began having children and needed flexibility with her schedule. She took on administrative and bookkeeping tasks and uncovered stealing by the previous bookkeeper who was prosecuted successfully.

When Jeff was engaged the family was in high conflict. The son was wondering when father would retire and full control and ownership would be transferred. For several years the son was functioning as CEO and grew the business significantly. The father was an excellent salesperson and had vision but was disorganized and lacked strategic follow-through.

Also, he handled retirement investing for himself and his wife on his own and was losing money needed to retire and be able to gift the business to son; this seriously impeded the transfer of ownership. At the same time, the son set a deadline by which he’d leave if business was not gifted as promised. He had the full support of his sister and also their mother who felt her husband was not following through. A main goal for the family was to complete the ownership transition with family harmony intact.

Main themes and interventions:
  • Father did not agree that he offered to gift the business to the son and daughter though mother, son and daughter all remembered he had. He also felt entitled to be paid for value created by the son’s growth of the business. The son and daughter, in good faith and to move forward, agreed to pay a fair, discounted price knowing their parents’ future depended on this money. They resented having to pay for the business when dad had originally offered it as a gift and this was exacerbated by dad’s demand to be paid for the growth.
  • The family had recently done a valuation of the business that seemed low to the father. Jeff offered to bring in a trusted business valuation colleague and the family agreed. The family felt the newly-determined value seemed fair and began to discuss the discounted price. Jeff helped them to outline a term sheet, involving many meetings and Jeff’s skill at calming families in crisis and developing a productive dialogue.
  • As with many entrepreneurs, the father was intensely involved in his business at the expense of hobbies and interests he once pursued. While families often get stuck on price in these situations, it is important for the entrepreneur to have a plan for an enjoyable and satisfying life after leaving the business. Jeff coached the father to develop a plan to reengage in travel, golf and fishing. He also worked with the couple together to find mutual interests and create a vision for married life after the business sale. This was crucial to the success of the transition.
  • The father had made several mistakes with respect to managing his investments and lost significant value in their retirement portfolio. His wife demanded a plan developed with a professional and with pressure from the children, father agreed. Jeff coached the mother on interviewing financial advisors, something she was unfamiliar with and nervous about. She interviewed several and spoke with her friends for support before finding a good match to be introduced to her husband. Together they began to outline realistic goals and an overall budget connected to the sales price of the business to the children. Grounding their future vision in a realistic plan brought calm and a sense of security not only to them but also the son and daughter who, while frustrated, wanted to see their parents taken care of.
  • Individual coaching with the father took place weekly to help him sort out his mixed feelings about walking away from his business and keeping commitments he made and was continuing to make with the family. His ambivalence left him bouncing back and forth between making promises and taking steps to transition the business to children, and then reversing course while frustrating and angering the family. Individual coaching helped him slow things down, be less impulsive and develop a plan he could commit to and follow through with.
  • The daughter did not have the business experience her brother had and wanted to be a better contributor to the business, especially when she and her brother took it over. Jeff worked with her on a development plan including individual learning, workshops, conferences and classes. Jeff worked with the siblings to develop a mentoring relationship in which the brother would expose her to more sides of the business with which she was unfamiliar and help her grow as a manager and future owner.
  • At the end of the engagement the family had a detailed roadmap for transition and was following through and enjoying non-business family relationships again.

*Identifying details have been changed to protect client privacy.