Family Business Matters 11/03 10:46
A shared vision, good communication and the freedom to choose to be business
partners helps set the stage for success in your family partnership.
By Lance Woodbury
DTN Farm Business Adviser
Usually, when we think of business partners, we think of people who work
together because their skills and personalities complement each other so value
is enhanced. For example, one partner is good with people, and another partner
is more mechanically inclined. Or, one partner enjoys finances and marketing,
and another partner loves being on the combine or planter.
But, agricultural families who want to keep land in the family often show
little regard for whether siblings of the next generation have complementary
skills or whether they are temperamentally fit to work together. People come to
be business partners because of their family ties, their parent's wishes or an
estate-planning strategy, not because they chose to go into business together.
The assumption is that since we are family, we will automatically work out all
the business issues together.
Yet, when siblings work together, they quickly realize being related does
not translate into a good business partnership. Expectations about
communication and decision-making change. Profitability, distributions and debt
become topics of conversation.
"Who's in charge" does not revolve around who is oldest but, instead,
becomes a financial and legal determination, and potentially a liability. It's
no wonder that family relationships begin to fray under the pressure of
business and financial decisions.
How can you avoid the problems you've seen neighbors and friends go through
after inheriting assets together?
DEVELOP A VISION
When people who were not in business together suddenly find themselves with
common ownership, they often bring different ideas of the future. Taking time
to fully explore each partner's goals, ideas and concerns offers a chance to go
beyond financial ownership and develop psychological ownership. Each owner
expressing his or her hopes for the future allows you to tailor your management
of the asset. If done well, a common vision can provide enthusiasm and guidance
for a generation or more.
CHANGE COMMUNICATION PATTERNS
Families often come together for special occasions. Holidays, vacations,
weddings and funerals are where people reconnect and rekindle their sense of
family. But, when shared property or financial assets become a reason for
gathering, the traditional family roles, communication patterns and decisions
change. Family events become tense when the discussion turns to managing money.
For example, an older sibling might take a leadership role in a family
event, but in a business discussion, the sibling with the most expertise, or
the family member who lives in closer proximity to the assets, may be the best
person to lead the conversation.
DEVELOP EXIT PLANS
At some point, someone will want out of the business partnership. Sharing
DNA does not always make for good business partnerships, and getting out of
business together may help you become a better family. At whatever point an
exit occurs, how do you think it will go? Will it be a bitter, expensive legal
battle or a delicate negotiation? What if it doesn't have to be either?
Recognize the process of unwinding shared ownership could be problematic.
Develop a process for exiting ahead of the need. Formulate a financial value
for each ownership interest. Outline the time frame and interest rate at which
a buyout occurs. And, define the types of situations that might trigger a
buyout -- for example, death or divorce. In short, figure out how to get out of
business together while you are still comfortable in business together.
As business ownership transitions to siblings and cousins, it is more
difficult to stay in business together. Yet, many families do hold assets over
several generations. A shared vision, good communication and the freedom to
choose to be business partners helps set the stage for success in your family
Write Lance Woodbury at Family Business Matters, 2204 Lakeshore Dr., Suite
415, Birmingham, AL 35209, or email email@example.com.
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