family business consulting: creating synergy between the “family strategy” and the “business...
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Family Business Consulting: Family Business Consulting:
Creating Synergy Between Creating Synergy Between the “Family Strategy” and the “Family Strategy” and the the “Business Strategy”“Business Strategy”WebinarWebinarThursday, June 24, 2010Thursday, June 24, 20101:00-2:40 pm Eastern Time1:00-2:40 pm Eastern Time
Joe SchmiederJoe SchmiederSenior AssociateSenior Associate
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Webinar Agenda TopicsWebinar Agenda Topics•Family Business Dynamics – Balancing
Family and Business Interests
•Governance – Blending Family Influence with Business Ownership & Management
•2 Key Planning Processes – Conducting Strategic Business Planning AND Succession Planning
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Family Business – Global Family Business – Global ImpactImpact•80%+ of all businesses•> 50% of Gross Domestic Product (GDP)
in U.S.•>75% of GDP in most other nations•80% of workforce in U.S.•75% of working population in world•>65% new jobs generated in U.S.•17 million family-owned businesses in U.S.•~7-8% greater performance
Sources: Poza, Ward, McKinsey, World Bank, Citi Bank
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Family Business Family Business PerspectivePerspectiveGOOD TO GREAT TO GOOD TO GREAT TO GONE!GONE!
Survival Rates• 1st Generation
• 2nd Generation – 33%• 3rd Generation – 12%
• 4th Generation – < 4%• 5th Generation – < 2%
Good Great Gone
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Four-Generation Four-Generation GenogramGenogram
Owner-Managed
Family Partnership
Sibling Partnership
Cousin Consortium
Family Syndicate Adapted from John Ward
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Who is Family?Who is Family?
Angry@ Sue
Sue
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Two Sets of Owners Two Sets of Owners In The Family In The Family BusinessBusiness
Family Members
NOT WorkingIn Biz
Family MembersWorking
In Biz
HARMONIZEHARMONIZE
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Johnson Family Johnson Family Genogram Genogram
Joseph P. Otillia
Ken‘33
Marilyn
Ron
Eric
Sandy
Jerry
Travis
Janette
Ryan
Doug
Sally
Sebastian
Jim‘47
Joe‘36
Karen‘40
MaryPam Jan ColleenLarry‘51
Don‘46
Holly Amy Eve
Pete
Kalli Krista
Sammi
ErinJessie
Kevin
Angelic
Benjamin
Scott
ScottNicole
Kay
Mike
Tony
Len
Brandon
Larry
Kyle
Coral
Lisa
Shannon
Ajay
AmirAsha
Asia SavanahAmir
Star
Denotes working in business
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Traditionalist (1900 – 1945) Baby Boomers
(1946 – 1964)
Generation X (1965 – 1980)
Millennial(1981 – 2015?)
Adjusting Adjusting to to GenerationGenerational al Viewpoints Viewpoints --- Up to 4 --- Up to 4 generations generations in the in the workforce!workforce!
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Balancing the Balancing the interests of Family interests of Family and Businessand Business
Health of business impacts satisfying needs of family and shareholders.
Health of family impacts strength of leadership and governance of business.
Needs of biz Needs of fam
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Two Opposing PositionsTwo Opposing Positions
Support family involvement▫View family as an asset▫Promote successor development▫Facilitate application of FB best practices
Resist family involvement▫Business and family should be separate▫Believe they must protect the business from
the family
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Pure Pure FamilyFamily First First CompaniesCompanies• Hiring family is good, family employee failure seen as
growth.
• Family should be in all leadership positions.
• Strategy, management and finance influenced by number of family in the business and their skills and interests.
• Loyalty is usually a key value.
• Non-family management “adopted” or considered outsiders.
• Employees usually report feeling like family.
• Generally not cutting edge or performance oriented.
RESULT - USUALLY DECLINE!
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Pure Pure BusinessBusiness First First CompaniesCompanies
• Looks like a public company
• Family employees get no special privilege
• Pay is to market, merit determines how far you get.
• Few family conflicts present
• Family often disconnected from the business
• Only stock holders are afforded power
• Usually only those in the business can own stock
RESULT - USUALLY SOLD!
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Where should we be?Where should we be?
FamilyFirst
BusinessFirst
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Foundation of Family Foundation of Family Business PlanningBusiness Planning
LeadershipTransition
OwnershipTransition
EstatePlan
RetirementPlan
Investments & Insurance
Family Values, Vision and Mission
Business Values, Vision and MissionJennifer Pendergast,
FBCG
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Parallel PlanningParallel Planning
Core Core valuesvalues
FamilyFamilycommitmentcommitment
FamilyFamilyvisionvision
EnterpriseEnterprisecontinuitycontinuity
planplan
GuidingPrinciples
Strategiccommitment
Businessvision
Business strategy
plan
ValuesValues
Strategic thinkingStrategic thinking
Shared future visionShared future vision
Formulating planFormulating plan
(Ward & Carlock)
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Alignment - Values, Vision, Alignment - Values, Vision, MissionMission
FamilyValues
Underlying principles that guide family decisions & actions.
VisionPicture of the family’s desired future.
Mission Core purpose: What we want to accomplish together as a family.
BusinessValues
Underlying principles that guide business decisions & actions.
Vision Picture of the business’ desired future.
MissionCore purpose: What we want to accomplish together as a business.
“Building a visionary company requires 1% vision
and 99% alignment.” Jim Collins
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Sample - Existing ValuesSample - Existing ValuesFamilyFamily • Honest, ethical, and
moral behavior• Respect• Trust• Integrity• Humility• Generosity• Live by the Golden
Rule: Do unto others Do unto others as you would have as you would have them do unto you.them do unto you.
Business• Safety• Honesty and integrity• Respect for others• Environmental
responsibility• Quality and
excellence• Family and
community
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Sample - Existing VisionSample - Existing Vision
FamilyFamilyTo successfully operate our family owned business so that it passes from generation to generation.
BusinessWorld leaders in commercial construction solutions.
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Sample - Existing Sample - Existing Family, Business Mission Family, Business Mission Family:
Our mission as a family is to help each other learn and grow in ways that promote happiness in ourselves and those around us, and to be responsible stewards of our family business, so that we might leave the world a better place for future generations.
Business:Our family-owned company will grow as a leading manufacturer and distributor of [widgets] by providing our customers with quality products and superior service for a fair price and profit.
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
“We honor the past by preserving family traditions and the legacy of Biltmore Estate; we live for the present
by encouraging open communication, mutual respect, and a commitment to family unity and to the family
business; and we plan for the future ensuring that our family and its heritage are preserved for generations
to come.”
Family Family Mission Mission StatementStatement
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Webinar Agenda TopicsWebinar Agenda Topics• Family Business Dynamics – Balancing Family and
Business Interests
•Governance – Blending Family Influence with Business Ownership & Management
• 2 Key Planning Processes – Conducting Strategic Business Planning AND Succession Planning
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Ownership Management
Family
Managing & BalancingManaging & Balancing3 Roles In A Family Business3 Roles In A Family Business
Governance refers to the ability to optimally discipline and control the nature of the relationship between family members, shareholders, and managers in such a way that the enterprise prospers.
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Types of OwnersTypes of Owners
“Legal” Owner Categories
Majority & Minority Voting & Non-Voting General Partners &
Limited Partners Trustee
Ownership
Board of Directors
Management
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Another Perspective onAnother Perspective onTypes of OwnersTypes of Owners Operating Owner – An
owner/manager or employed owner involved in the day-to-day operations of the business.
Governing Owner – A full-time overseer but not involved in operations – like a chairman of the board.
Involved Owner - Not employed in biz but takes a genuine interest and is attentive to all its issues.
Passive Owner – Merely collects dividends. Makes no conscious decision to stay an owner.
Investor Owner - Like a passive owner, but if satisfied with returns, makes a conscious decision to retain ownership.
Proud Owner – Not knowledgeable about the business or engaged in it, but still proud to be an owner.
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Benefits of Benefits of Family Business Family Business OwnershipOwnership
For Families Provides a cohesive focus
that brings family together Offers family members a
shared sense of responsibility
Serves as a source of family pride
Gives the family a means of putting values into action
Helps family members develop leadership skills
Makes life more interesting Builds wealth
For Business Enables a company to
outperform & outlast others Provides support through the
deep caring of a team of people aligned in values & goals
Assures continuity through long-range vision & family’s desire to pass the biz to future generations
Enjoys a corporate culture grounded on conscious values
Receives the trust of the community based on its identification with the family
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
3 Proven Factors 3 Proven Factors To Family Business Continuity To Family Business Continuity SuccessSuccess•Active Board of Directors
•Family Meetings
•Planning – ▫Strategic Planning ▫Succession Planning
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Sample Governance Sample Governance StructureStructure
Shareholders
Board of Directors
Family Counci
l
Advisory Board
President & CEO
VP Marketi
ng & Sales
VP Operation
s
VPAdmin
OwnersCouncil
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
FamilyGovernance
Meetings
Shareholders
Board ofDirectors
Family education committeeNext GenerationcommitteeFamily vacations / assemblies planning committee
Management
Family
Family foundation committee
Family employment
policy committee
Strength from
balance of three
Business ofBusiness ofthe Businessthe Business
Business ofBusiness ofthe Familythe Family
(© 2005 McClure)
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Where Do Boards Fit?Where Do Boards Fit?
Board of DirectorsBoard of Directors
As Family & Ownership grow in numbers & complexity – oversight function of board becomes more important, to give comfort to owners that their interests are protected and well managed. As the business grows and
becomes more complex – role of Board in providing sophisticated advice becomes more important…
Family CouncilFamily Council
Owners CouncilOwners Council
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Where do Boards Fit?Where do Boards Fit?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Board & Exec Team Split Board & Exec Team Split RolesRolesBoard = Oversight
• Approve company’s mission and vision
• Approve annual business plan
• Select, evaluate and plan the succession of the CEO
• Evaluate CEO performance
• Evaluate board’s performance
• Ensure effective organizational planning
• Approve and participate in making key strategic initiatives
• Serve as a court of appeal
Exec Team = Strategy Development & Execution
• Protect shareholders and stakeholder interests
• Profitably grow and continuously strengthen the business
• Prepare business plan• Achieve plan objectives• Build an effective organization
▫ Integrate family where appropriate
• Implement financial controls• Effectively communicate to Board• Create a positive, progressive
culture
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Committees of the BoardCommittees of the Board
Audit– Financial Review
Compensation (& Evaluation)– Set compensation for CEO, incentive plans,
oversight on other compensation
Nominating & Governance– Location of new, independent directors
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Strategic Involvement of Strategic Involvement of Board Board
Any major decision that has a significant financial impact or on-going obligation
Key strategic issues that require multiple inputs– Major growth opportunity needing significant
resources– Acquisition, Geographic expansion, Divestiture, etc.
Major organizational change (structure &/or key personnel)
Crisis management Weak performance (results) Overall decline in value of business Other high risk/reward issues
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Evaluating an Active Evaluating an Active BoardBoard
Evaluation Criteria Weak Meets Peak
1. Focuses on Strategy/Policy
2. Helps Invent
3. Provides Expert Advice
4. Knowledge of Business
5. Preparation/Attendance/Punctuality
6. Initiative (Proactive)
7. Integrity/Confidentiality
8. Participation (Balanced)
9. Works Well With Others
10. Overall EvaluationSource: 5 Steps to Board Success
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Governing Family Business Governing Family Business ContinuityContinuity
Objective Oversight
Family Management
Strong Leadership
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
The Purpose of Family The Purpose of Family MeetingsMeetings• Strengthen the family -
build trust
• Clarify family values, expectations and hopes
• Manage in/out group dynamics
• Prevent and resolve conflict
• Provide a forum to navigate family business matters
• Define and reinforce appropriate roles for all
• Prepare the next generation for future roles
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Are We Ready for Family Are We Ready for Family Meetings?Meetings?
Readiness signs
• Next generation approaching working age
• Family employee advancement
• Succession nearing
• Good will and trust
• Icebergs spotted
We may need help!
• Emotions rising
• Safety threatened
• Open or unresolved conflict
• Cut off by family member
• Icebergs hitting ship
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Family Meetings
1/3 FUN
Games
Dinners
Tournaments
Talent shows
1/3 FAMILY DEVELOPMENT
Team Building
Role Clarification & Planning
Policy creation
Skill training
1/3 FAMILY BUSINESS
INFORMATION
Plant tours
Estate review
Business/Financial overview
Meet with directors
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Time for a Family Council?Time for a Family Council?
Consider when…
• Family expanding
• Growing ownership complexity
• Need organization to maintain multi-year agenda
What is a Family Council?
• Standing body
• May be representative
• Guided by Charter
• Rules for functioning
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Executive Council (Officers)Family Council Chair
Chair-Elect Secretary
Family CouncilExec. Council+ Committee ChairsCommittee
Members
CommitteeChair -Education
CommitteeMembers
CommitteeChair -Communication Committee
Members
CommitteeChair -Philanthropy
CommitteeChair -FamilyMeetings
CommitteeMembers
Family AssemblyAll Family Members
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Roles and Responsibilities Roles and Responsibilities of a Family Councilof a Family Council
1. Build trust among family members
2. Become educated about our responsibilities as a family
3. Explore our commitments to each other and to the business
4. Provide a forum to address family concerns
5. Make decisions on matters that impact the family
6. Assure that we relate appropriately to the business
7. Prepare for ownership and management transition
8. Make decisions on matters that impact our family business
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Family Council ConnectionsFamily Council Connections
Family Council
Management
Board of Directors
Family
44
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
OwnershipGovernance (Board)
BusinessManagement
FamilyGovernance(Family Council)
BalanceBalance45
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Webinar Agenda TopicsWebinar Agenda Topics• Family Business Dynamics – Balancing Family and
Business Interests• Governance – Blending Family Influence with Business
Ownership & Management
•2 Key Planning Processes – Conducting Strategic Business Planning AND Succession Planning
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Most Value – Most Value – Inside the Family BusinessInside the Family Business
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Most Value – Most Value – Diversity = Financial Diversity = Financial Security?Security?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
The Family Business The Family Business Triangle™Triangle™Balancing three needs in a family business systemBalancing three needs in a family business system
Need for CashDe Visscher & Co.,
LLC©
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
CPA Plan One-Page CPA Plan One-Page TemplateTemplate
1 1 1 1
2 2 2 2
3 3 3 3
4 4 4 4
5 5 5 5
6 6 6 6
7 7 7 7
Date: January 2009
Core Values/BeliefsForever
Purpose
BHAG
Trends
Sales
COS
GM
GM %
SG&A
Op Prft
Op Prft %
Int Exp
Net Prft
Product & Service Strategy
Capital Needs for '08: $____
Total
Equity
External Impacts on Business
2007 Indicators
Monthly
Assets
Balance Sheet
Targets & Strategies
Target Markets
2007
Profit & Loss ($000)
Positioning
Brand
Competitive Situation
S.W.O.T. Analysis
Confidential
1-Page Strategic Plan Summary 2009 DRAFT (1-10-09)
Current
Long-Term
Liabilities + Equity
Current
Long-Term
Total
Financial Summary
Dashboard Measurements
Pricing Strategy
Promotion Strategy
2007 Strategic Goals
Measurable Strategic Goals
Threats to making plan Critical for Success in '07Opportunities to exceed planWeaknesses
Business Description (today) - Office furniture dealer specializing in _________________, and focused primarily in the territory of ______________
Purpose
Vision
Now to 30 Years Out
Strengths
Target Market Influencers
Sales Distribution Strategy
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Why One Page?Why One Page?
•Complexity >>>to>>> Simplicity!•Use-ability!•Communicate-ability!•Puzzle Challenge!
S.W.O.T
Strategies
Trends
Vision
Goals
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
GLADE®, OFF!®, PLEDGE®, RAID®, SCRUBBING BUBBLES®, SHOUT®, WINDEX® and ZIPLOC®
Monday, March 01, 2010 SC Johnson Named Fourth Most Innovative Company in 2010
Company is Recognized by Fast Company’s Annual ListRACINE, Wis., March 1, 2010 – SC Johnson ranks fourth in the Consumer Products category on Fast Company magazine annual Most Innovative Companies list. Fast Company’s team analyzed information on thousands of businesses across the globe to identify companies that use creative models and have progressive cultures. The companies that made the list were commended for their real-world impact, far-sighted risk taking and innovative execution.
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Welcome
Furniture
Design
Installation
Core Competencies Interior design Interior design High-level High-level relationshipsrelationships
Markets Healthcare Healthcare
Education OfficeEducation Office
Size of Opp > $1 million> $1 million
Competition< 3 major< 3 major
playersplayers
Geographic Within 500 Within 500
miles (800km)miles (800km)
Screen criteria for new Opportunities
Family BusinessFamily Business
Gen-2 wants to Gen-2 wants to diversifydiversify
Caselet
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Welcome
Furniture
Design
ArchitectureProducts
TechnologyProducts
InteriorConstruction
Services
FloorCoverings
InteriorEnhancements
FacilityManagement
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Family Dynamics – Family Dynamics – Why Not Plan An Exit?Why Not Plan An Exit?• Ponce de Leon syndrome• Family politics and infighting – avoid conflicts
▫Fair is not always equal; Equal is not always fair
• Confusion about succession planning options• Confusion or misunderstanding over tax and
financial implications• Fear that exit / succession discussions will
scare non-family executives away
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Readiness - The DifferenceReadiness - The Difference
LeadershipResponsible for guiding & leading a business
OwnershipControl of the stocks and assets of a business
What comes first in a successful transition?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Succession StepsSuccession Steps
1. Financial/Life & Estate Plan
2. Strategic Business Plan3. Ownership Options4. Readiness of Leadership
& Ownership Transition5. Business Valuation 6. Exit Plan
1. Family & Business Foundational Strategies – Values, Vision, Mission
2. Business Strategic Direction & Plan
3. Organization & Governance Structure
1. Leadership Succession Scenarios
2. Skill Requirements3. Training & Development4. Performance Review
Process5. Selection Process6. Selection & Transition
Leadership
Ownership
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Kadle Family BusinessKadle Family BusinessSenior Generation Senior Generation
Sorted by AGE as of
9-14-09
Career Goals &Expectations
TimeframePotential Training
Ownership
Melvin(61)CFO / Controller
Transition the admin/finance leadership role
Phase out of day-to-day by age 65; possibly scale back to part time, provide some consulting or project work
Effective transitioning of skills to next gen
Develop potential internal successor(s).
Redemption program set up with insurance
Co to buy back shares
Next gen to have opp to buy shares
Stays w/ those in biz
Bill (60)President & CEO
Develop succession plan that includes phase out from day-to-day work
Key is to have plan in place
Over 3-4 year period move out of day-to-day
Effective transitioning of skill set to next gen
For people working in biz
Keep family involved
Make fair Gift some
Marilyn(58)Sales Mgr
Continue in current role until retirement at age 63
~5 years Stays in family Exec mgmnt earns
reward for annual performance
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Succession Scenarios - Succession Scenarios - Example Example 2009 2010 2011 2012 2013 2014 2015 2016
G3-1 Chief Financial Officer
Transition out of day-to-day mgmnt G3-2 President & CEO > > > > > > > >Chairman
Transition out of day-to-day mgmnt
NF-EXEC Vice President, Sales & Marketing > > > > Start transitioning from day-to-day mgmnt
H/c benefits to 65 >>>
NF-EXEC Location 1 Operations Manager >>>> >>> ?????
Open to transition that works for XXX
(Daughter graduates from college)
NF-EXEC General Manager - Location 3 > > > > for rest of career > > > > ? ? ?Maybe take on more responsibilty as G3-1 AND G3-2 transition out day-to-day
NF-YOUNG EXEC Location 2 Operations Manager >>>>> >>> ?????
Assist w/ G4-5's successor Possibly take on role as Operations Mgr for XXX Open to other roles - sales?
G4-1 HR / Fin (A/R)
Increasing admin (Fin, IT) responsibility Admin leadership role??
Learning more about XXX customers, products, business systems (IT)
G4-2 RR Operations Facility/P&L Resp Company ldrshp role
Mkt & Sales roles (VP Sales?) Learning more about various company aspects - admin, legal, accounting, etc.
G4-3 Sales - servicing existing cusomers
Move to "new" sales calls - business dev; mkting role Learning more about operations, product training
Admin
G4-4 Bldg Coordinator Matrerials Manager?
OperationsInventory>>>w/h mgmnt
Sales
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Primary Ownership Primary Ownership Transfer OptionsTransfer Options
ThirdParty
Transition
FamilyTransition
InsiderTransition
Employees
Partner Financial
Strategic
Sell
Gift
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Caselet 1Classic Small Family Business
• Senior generation (parents) own the business and
work in the business• Have 3 children
▫2 sons work in business (1 capable)▫1 daughter a teacher
• Parents prefer to leave equal amount of estate to children
• What can they do?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
62
Board of Directors (6)2 from family 12 from family 2
1 CEO (non-family)2 outsiders
Corporate ManagementNon-Family CEO
1 Family member on mgmnt Team
ShareholdersCaselet Caselet 22Family deciding Family deciding what to do with what to do with businessbusiness
Family debates:• Should we sell now or further develop?• Should we take some chips off the table?• Should we make deeper investments & plan to hold for multiple generations?• Could one family buy out the other?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Strategic Strategic Family Family Ownership Ownership ScenariosScenarios
Ownership Trust ~56%
Fam 1 ~22%
Fam 2 ~22%
Family >50%
Outsider 20-49%
Outsider >50%
Family <50%
Outsider 100%
Value - 09•Enterprise•Shareholder
$50 – 52 M
$42 – 45 M
$50 – 52 M
$42 – 45 M
$50 – 52 M
$42 – 45 M
$50 – 52 M
$42 – 45 M
Capital for Growth
•Rely on family & banks.•Trade mix of product offering•Slower growth potential
Some $$ from outsider; possibly some from reduced dividend and bank
Majority$$ from new outsider
N/A
Risk of Family Assets
High– most of family assets tied to XXX Fam Biz
Moderate –some diversification of family assets
Moderate to Low – Majority of assets spread to selected investments
Low – All family assets spread to variety of investments
A.Continue
As Is
A.Continue
As Is
B.Sell
Minoritystake
B.Sell
Minoritystake
C.Sell
Majoritystake
C.Sell
Majoritystake
D.Sell TotalCompany
D.Sell TotalCompany
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Pros •Full control •Leverage capital & synergy w/ partner
-Complementary products, technology
-Greater distribution
-Customer production line integration•Reduce risk - Take some chips off table and still participate in some upside
•Realize full return and use funds to diversify
Cons •Unable to grow all areas at once•High risk w/ XXX market
•Governance becomes an issue – board seat for minority s/h.
•Lose control. •Possible career options for son in biz
Estimated Shareholder Returns
Annual div ~$800k ($400k/fam)
Enterprise Value growing
Likely need to adjust div for some period (2-3 yrs). Return realized in future sale, some div.
If sold toTrust, could net ~$7.5M/fam yielding $375k/fam @ 5%; plus realize some future enterprise gain.
Assuming sale of $50M, could net $18M/fam yielding $900k/fam @ 5%
A.Continue
As Is
A.Continue
As Is
B.Sell
Minoritystake
B.Sell
Minoritystake
C.Sell
Majoritystake
C.Sell
Majoritystake
D.Sell TotalCompany
D.Sell TotalCompany
Strategic Strategic Family Family OwnershiOwnership p ScenariosScenarios
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Investment Banker Input
“Keep making B/S stronger. Liquidity is key issue today.”
(We are nearly tapped out under the Bank arrangement.)
•“Remote possibility. Might find a friendly willing to structure deal.”•Either outsider buys part of family stock or contributes capital, diluting share value.
•“15-20 potential strategic & financial buyers. No one paying for future benefit (premium) today.”•Question today is timing. •Likely candidates would be closely-held xxxx companies in strong cash position that have axxxx platform and see synergy gained from xxx acquisition.
Fee Structure
N/A •$100k up front•$15-25k monthly fee (may be credited against success fee)•3.5% on first $10M of Enterprise Value•1% on EV >$10M•Estimate a deal fee of around $800k
A.Continue
As Is
A.Continue
As Is
B.Sell
Minoritystake
B.Sell
Minoritystake
C.Sell
Majoritystake
C.Sell
Majoritystake
D.Sell TotalCompany
D.Sell TotalCompany
Strategic Strategic Family Family OwnershiOwnership p ScenariosScenarios
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Yesterday>>>>>Today>>>ToYesterday>>>>>Today>>>Tomorrowmorrow
2010
2020
1960
How will your family business adapt to changing times?
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Parallels & Paradoxes - Parallels & Paradoxes - QuestionsQuestions
FAMILY BUSINESS
Managing these parallels & paradoxes well can create a strong Managing these parallels & paradoxes well can create a strong synergy between the “Family Strategy” and the synergy between the “Family Strategy” and the “Business Strategy!”“Business Strategy!”
Copyright 2010 – J. Schmieder www.efamilybusiness.com
The Family Business Consulting Group Inc®
Thank YouThank You
Joe SchmiederSenior Associate
schmieder@efamilybusiness.com
Phone 616-299-0340
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