In this issue
In the past 50 years, many family businesses in a variety of industries have become extinct, or at least endangered species. The odds of a family business lasting three generations have always been long, but the rate of product adoption and obsolescence today makes this dream even less likely. For example, it took 50 years for the telephone and the automobile, introduced in the late 1800s, to gain 50 million users worldwide. Compare that with the cell phone, introduced in 1973, and Skype Internet calling, which debuted in 2003.
Bradford, Pa., is not a place where one would expect an international icon to be made. It’s located about 130 miles northeast of Pittsburgh, near the New York border, where the landscape is lush with trees and wildflowers, the deer-to-human ratio weighs heavily in favor of the deer and tourists driving along historic U.S. Route 6 can travel for an hour without seeing so much as a single dwelling or gas station.
Most family businesses and single family offices around the world are still dealing with the aftermath of the financial crisis. Many are confronting an interesting problem: a significant shift in allocation of the family’s total wealth between operating assets (the business or other mostly illiquid investments) and financial assets (the family’s liquid investment portfolio).
During a recent visit to an airport, I realized that there are many similarities between a pilot flying a plane and a next-generation business leader taking on meaningful responsibility in the family firm. While it’s exciting to be on an airplane as it accelerates into its takeoff, I’ve been told that this is one of the most dangerous parts of flying. Similarly, the way a next-generation member assumes meaningful responsibility in a family firm has implications for the future leader’s long-term success in the organization.
If you have spent quality time with business families, you likely have heard comments like the following:
• “I think raising this issue would be more damaging than helpful.”
• “I’ve tried to talk about it with my sister, but she’ll never do anything differently, so what’s the point?”
• “Every time I talk to my cousin, we start fighting our parents’ old battle, so now we just avoid it.”
We’ve all heard horror stories of a family business sale gone awry. Often the problems result from lack of coordination and cooperation among divergent family factions. Yet with sound advice and good planning, an exiting family won’t just survive a sale; they’ll thrive—personally and financially.
The key to a successful sale is to achieve buy-in and appropriate engagement from all family members involved. Five best practices have been shown to help smooth the transition.
I recently read War at the Wall Street Journal, by Sarah Ellison (Houghton Mifflin Harcourt, 2010), a wonderful tale of modern family warfare. It’s an easy-to-read, gripping story about a very large family that couldn’t get its act together. Rupert Murdoch wanted to own Dow Jones, publisher of the Wall Street Journal. Dow Jones’ owners and executives didn’t want him to have control.
In 1934, after Prohibition had ended, five Shapira brothers joined a group of investors to found Heaven Hill Distilleries on a farm outside Bardstown, Ky. “It was a real risky venture,” says second-generation company president Max Shapira. “It made the dot-com ventures of the late 1990s look like a blue-chip investment.” The Shapiras were sons of a Jewish immigrant who had turned a pushcart notions business into a small chain of dry goods stores within one generation.