Every Family Business

Every Family's Business

Every Family's Business presents 12 common-sense questions that help shape a business family's wealth creation and preservation plan

Every Family's Business advocates an interesting exit strategy option every family business owner should consider.

When we begin working with a family business client, we start our discussions with the family business owner talking about the owner’s exit strategy options. The most commonly held notion is that the family business owner would like to pass the family’s business to the next generation of family to own and manage – the idea of creating a family business legacy is very compelling.

But is the “legacy” option the best decision in terms of protecting family wealth?

Selling the family business is an exit strategy option that is more often triggered by expediency. For instance, when there is a death of the business owner, the family may not have the skills and training to run the business. Sometimes a divorce can trigger a sale of the family business. Sometimes there are no viable successors within the family. Perhaps an “offer” the family business owner can’t refuse…!

The point here is that the sale of a family business is often a “reactionary” option – a reaction to other circumstances that affect the family business and the family business owner.

Don Schwerzler, whose experience working as an advisor to family business entrepreneurs spans more than 40 years, states "over more than four decades, there have been only a relative handful of these family business entrepreneur clients who actually consider selling the business as their primary exit strategy!"

Think about this. Real estate appraisers are guided in the valuation of real estate by the principal of “highest and best use”. It states that the value of a property is directly related to the use of that property. The highest and best use is the reasonably probable use that produces the highest property value. This may or may not be the current use of the property. Could this same principle be applied when discussing a family business? Could the family’s knowledge, experience, contacts be harnessed more profitably by selling one business and starting another?

Along these same lines, another concept worth discussing – does a family business have a shelf-life? Consider this – the year is 1910 and your family is in the business of manufacturing buggy whips. A family business owner with a clear crystal ball could see that with the surge of the automobile, the market for buggy whips would decline. Given this situation – would it not be smarter to sell the buggy whip business rather than hoping your children and your grandchildren would continue the family enterprise?

Obviously, forecasting the future for a family’s business is never that cut and dried – but what if it is? What if the question posed to a family business owner is framed as a strategy to protect and maximize family wealth rather than creating a generational family business?

That is the premise of a very interesting book, Every Family's Business written by Thomas Deans.

Deans earned a Ph.D. in finance and economics – also served as president of a multi-national family business for 10 years.

Three generations of his family have founded, operated and sold their businesses for a combined value of more than $100 million.

Three generations of the author’s family have elected to involve family in business, to educate children about the “nature” of business and have passed wealth, never an operating business, to the next generation. This “start–and-sell-approach” has shaped Deans’ unique view of family businesses - and inspired his book Every Family's Business.

Every Family Business is presented as a conversation between two family business owners (different families – different businesses) discussing their exit strategies – airplane “seat mates” on their way to a Caribbean island. If you are involved in a family business, you will likely identify with much of the family drama these two men experienced as family business owners portrayed in Every Family Business

We think Thomas Deans offers some new and innovative ideas for families in business together – thought provoking ideas about creating and protecting the family’s wealth. All too often family business books promote the idea that perpetuating the family business is the only valid succession plan—that the longer a business remains in family hands, the greater a family’s success. What makes Every Family's Business different is the idea that the “key” to succession is selling the business, if not to family, then to a third party.

Every Family's Business actually singles out the act of “gifting” an operating business to family as the single greatest source of wealth destruction.

Every Family Business tells business owners that it’s not only okay to sell the business, but it is essential that they do.

If family members decide not to risk their capital and purchase the business from their family they are in effect passing judgment on their own ability to create new wealth from the business.

On the other hand, according to Every Family Business, when family do risk their capital and purchase the business, they have authenticated their ownership which allows them to drive innovation in the business.

Children who have received operating businesses as gifts most often run the businesses like museums and fail to drive change and innovation – the lifeblood of business.

More disconcerting is the reality that gifted businesses are often never sold – the succeeding generation finds it emotionally difficult to part with “the” gift – it’s always hard to sell a gift.

Every Family Business reveals the “burden of legacy”, the burden of perpetuating the family business as one of the greatest wealth destroying forces at work in Family businesses all around the world.

But instead of stopping there, the book goes on to offer 12 questions that will lead business owners and their family to build a succession plan that is right for them.

This is an extraordinary book offering a contrarian and powerful message. We highly recommend Every Family’s Business and think that business owners will view the process of succession planning in a completely new way that puts wealth protection and family first.

Read an exclusive interview with best selling author Dr. Thomas Deans

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