Kenny Rogers sang of the importance of knowing “when to hold ’em, and when to fold ’em”. Any succession plan worth its salt isn’t just a plan of who will succeed whom in running the business. It also needs a “Plan B” for the scenarios where the chosen successor is unwilling or unable, where there is no successor, or where a generational transition of the business might lead to serious conflict. Some business founders/owners enjoy…
A “universal truth” about the imbalance of inputs and outputs is what became known as the Pareto principle, or the 80/20 rule. While it doesn’t always come to be an exact 80/20 ratio, this imbalance is often seen in various business cases, Here we will address how not to sell a family business. 0% of all businesses do not sell, and only about 30% of family businesses get handed down to the next generation. If…
Coming into wealth suddenly – such as through inheritance or a windfall liquidity event of a family business – can carry serious risks. The rapid change in financial circumstance can lead to poor decision-making, a loss of perspective, and social isolation. It can lead to a dysfunctional relationship with money/wealth. In the case of inheritance, there can be mixed or conflicting emotions of loss and gain. It can be like winning the lottery, and research…
This is a difficult topic to broach, and needs to be done only in appropriate settings – indeed, that might be the most important message of this topic. After the story of BMW heiress Susanne Klatten went public, she was slammed on social media. Her personal challenges – the responsibility, self-doubt, and being targeted by scammers – are real. But it’s very hard for anyone brought up without wealth to have any sympathy (and often it’s the reverse), so seeking it from ‘outsiders’ is almost a waste of time.
The challenges of bringing up children with wealth are predicated on the idea that said wealth will transition to said children. But what if it won’t? Some families are thinking more about giving away the bulk or almost all of the family wealth to charity. In the US, families are talking about giving a maximum of $15M to each child (and the rest to charity). There are different reasons driving this (don’t want to leave…
One of the biggest challenges in wealthy families is when/how to talk about the family wealth to children. There are a number of factors to consider: 1. Being aware of other ways children will learn about it themselves, e.g. from the media, direct research, and from friends (it’s a bit like sex education). Would you rather your children find out about the family wealth from reports and rumours that are laden with assumptions? It’s better…
The e-word – “entitlement” – comes up in almost every presentation or lecture I give, and in many family discussions. It has become almost a dirty word when it comes to family wealth – something to be avoided at all cost. “How can I prevent my children from becoming entitled?” is what most every parent wants to know. When it comes to family business, limiting the negative impact of entitlement can be achieved by instilling…
A ‘family business’ is more than just a business owned and operated by a family. In addition to being a vehicle of wealth creation and entrepreneurship for the family, these businesses can bring other non-financial benefits – known as “socioemotional wealth” or “social capital” – to family members. Being part of the family enterprises brings feelings of pride, personal reward and satisfaction, and can constitute a part of family members’ identity. These additional intangibles are…
Can you have the best of both worlds? Family businesses have to tread a fine line: they must compete like any business, while also maintaining harmony amongst the family – both those who are involved in the family business and those who are not. There are a few common themes that help families maintain this balance: 1. Trust is essential, and what builds trust are good communication and transparency. Anywhere information is not provided, people…
While the family business may be delivering good returns, how much is it actually worth? Often, family members are disappointed that the market value does not reflect a large enough multiple, because they are unable to look at the business as an outsider (and potential buyer) would. The first article has some classic ‘value drivers’ expressed in terms of growth and risk reduction. What I think this is missing from this model is the most…
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