Understanding and Managing the Complexities of Family-Owned and Closely Held Businesses Seminar

Recently, BSSF partnered with Messiah College and the Delaware Valley Family Business Center (DVFBC) to present the local business community with a half-day seminar, discussing the challenges that face family-owned and closely held businesses. Hosted on the Messiah College campus, the seminar covered a breadth of topics, including ways to think about governance, working collaboratively and effectively with your advisors, healthy inter-generational transitions and managing leadership and communication issues.

The seminar wrapped up with a panel of three family-owned and closely held business leaders:

Here are some key takeaways from the seminar:

Designate Roles and Responsibilities

Sally Derstine of DVFBC presented the idea of the “Five Family Business Mountains,” and how those mountains all work individually to create business and family unity. The various mountains have different roles:

  • The Family Mountain is responsible for nurturing family relationships, developing and educating leaders, ensuring healthy boundaries and raising caring and responsible people.
  • The Shareholder Mountain is responsible for creating a united message for the company: values, mission, policies and vision. They are also responsible for electing a board of directors.
  • The Management Mountain delivers goals that are approved by the board and develops and implements sustainable strategic plans, teams and systems.
  • The Board Mountain evaluates managers and also takes on the responsibility of balancing business needs with goals that are set by the shareholders.
  • The Advisor Mountain is there to provide experience and expertise to support not just the business but also the family in ensuring sustainability and successful transitions.

These mountains all contribute to the overall health of the family and the business to ensure success in both areas.

Create and Collaborate with a Team of Advisors

In their presentation, Tim Grunstra and Bruce Brown spoke about the need to have not only a team of professional advisors but an advisory board – and those people should not overlap. Your advisory team would ideally consist of a(n):

  • Accountant
  • Attorney
  • Insurance Agent
  • Banker
  • Family and/or Closely Held Business Consultant
  • Wealth Manager

ยท Other Miscellaneous Consulting Service Providers (Marketing, Technology, HR)

You should clearly define what you need from your advisors and also expect their objectivity, honesty, consistent effort, feedback and also pushback on some of your ideas because they may have other suggestions that could prove to be more beneficial.

While you do need a professional team of advisors, you also should consider a board of advisors for your family-owned or closely held business. The board should consist of around three to five people, who meet at least twice a year to discuss your business on a strategic level. For your advisory board, consider business owners or professionals, whose businesses are at a level that you would like you business to be at, not on the same level as your business. This will ultimately be more helpful for your business growth.

Rising Generations Have to Step Up and Senior Generations Must Let Go

Jared Byas from DVFBC outlined the ” Five Principles of Healthy Intergenerational Transitions ” in his presentation. In family-owned and closely held businesses, transitions can be complicated and emotionally charged. However, there are five key things that must happen for a healthy transition and for the business to succeed:

  • The Rising Generation Steps Up and Chooses to gain clarity, earn trust and make choices. They have to step in to understand the business, their colleagues and themselves, after which they can contribute and begin to make choices. This can be accomplished through peer groups, family meetings, coaching or working with an advisor to create a custom solution.
  • The Senior Generation Prepares and Lets Go by preparing for the transition with: a transition team, a timetable for the transition, a governance plan and a financial plan. They must also write their next chapter and figure out what that looks like.
  • All Family Members Count in the transition process. The example given by Jared was that while you may think your son/daughter isn’t interested in being involved, unless you discuss it with them, you won’t know. So everyone should be involved in the discussion.
  • The Best Counsel is Collaborative and should include everyone, not just the advisors or just the transition team. Your advisors will be there to collaborate and test the implementation of the transition.
  • Both Generations Seek the Common Good for the success of the business and the family, which means they must work together and invest the time, energy and money.

Take Care of Communication Issues and a Succession Plan

In his presentation, Dr. Andrew Babyak from Messiah College talked about the importance of communication and presented us with a case study that highlighted a worst case scenario in succession planning: two brothers, who thought they should be their father’s successor but choosing either one of the brothers would create a negative backlash in the family. The family and the business were suffering from a lack of communication between father and sons, as well as within the family.

The case study served to drive home the fact that everyone in the family, not just those who are in the business, needs to be involved in a succession decision. In the case study, the mother and two sisters were not involved in the business. However, they could benefit from having a family meeting to discuss the succession, and perhaps through those family discussions, a decision could be made that everyone would be comfortable with. Also, the family could benefit from an outside counsel that has experience with dealing with succession in family-owned businesses and could facilitate the discussion.

Hopefully these takeaways will help you as you progress in your own family-owned or closely held business.


Family-Owned & Closely Held Business Committee

Family-Owned & Closely Held Businesses Committee

If you have any questions about our Family-Owned and Closely Held Business Group, feel free to contact: Bruce Brown, Ryan Brown, Robyn Dougherty, Matt Fox, Tim Grunstra, Randy Fackler or Jeshanah McLeod.