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The Idea of Family Wealth
What Would You Die For? | Brad McLain
Brad is a social science research professor at the University of Colorado Boulder’s Center for STEM Learning and is co-director of The Experiential Science Education Research Collaborative. Dr. McLain is an accomplished filmmaker originally from Norfolk, Nebraska, and he attended the University of Nebraska Lincoln for part of his undergraduate education. He is a member of the board of directors for the JGI, Jane Goodall institute.
David Christian: The history of our world in 18 minutes
Entrepreneurs and Small Business Owners Can Use Acquisitions to Double or Triple Their Customer Base Overnight
Business Growth Strategies
What many business owners don’t realize is that it can be cheaper as well faster to go with the acquisitions growth strategy. To illustrate this, let’s take a look at cases where this was capitalized on from the recent past. Specifically, let’s look at businesses which utilized subscriber revenue models such as cable-TV and Internet service providers. If you owned a small system in either industry, you were faced with a choice of growth through marketing or acquisitions. Now suppose that you had set as your goal a doubling of your subscriber base in five year’s time. We will assume that this target is extrapolated from your growth rates over the last three years. An analysis of your customer acquisition costs needed to double your sales over three years may show that a marketing based strategy’s costs will exceed those of an acquisition strategy. Morever, the acquisitions route will achieve your goal by doubling the subscriber base as soon as the deal is finalized.
Business Growth via Acquisitions
Back in the 1990s, there was a great deal of M&A activity in the printing industry. One large printer embarked on an acquisitions strategy to expand the market for its three core services: document scanning, fast high-volume printing, and distribution of legal documents, such as proxy statements and collections letters. As a result, the company focused on acquiring small printers which offered only one of these three services. After the acquisition, the absorbed company would be able to offer its customers the expanded range of services made possible by the acquirer. This, in turn, enabled them to win over larger local accounts that they could not have otherwise serviced before.
This is a typical example of what drives a company to employ an acquisitions strategy.
The Tycoon Playbook covers the details of designing a successful M&A strategy for small businesses and entrepreneurial companies.
My Top 10 Tips to Shorten the Life of Your Family Business by Tom Deans, Ph.D.
I’ve certainly enjoyed more than my fair share of quality time on airplanes to contemplate some of the fascinating family business stories I’ve collected on the speaking circuit.
It’s pretty common for professional speakers to spend a little time with audience members who confess their stories and share details about their family firm fiascos after an event – typically during the book signing.
Sadly, most of these stories are stranger than fiction. Some people who share their tales are looking for a kind of absolution for their family business sins. But dispensing penitence is a task I’ve never done particularly well; it’s always my cue to send someone in the direction of the advisor who hired me so that they can receive the proper professional care they deserve and require.
Underlying these tales of family business woe is always personal tragedy on a scale that for me is unfathomable: estrangement between children and parents and between siblings, and physical violence that’s been known to include murder – and I’m not kidding.
On a lighter note, as I vacation in Spain recharging my battery before another busy fall speaking season, I’ve prepared a lighthearted list of the Top 10 Tips to Shorten the Life of Your Family Business. Read ’em and weep.
Top 10 Tips to Shorten the Life of a Family Business
Invite all your children into your business as soon as they’re able to walk so that you can enjoy as much of their free labor as possible. Remember to promise them that “one day all this will be yours” and look closely for the excitement in their eyes. Those are tears of joy.
Always give the most important jobs to your eldest child (but only a male) and pay him (if you must) vastly more than your other children – this is how great family dynasties are built. It may seem unfair, but it’ll toughen some of them up and really set the stage for great Thanksgiving dinners for years to come.
Talk about your family business history often with your children and remind them that “we have always been (fill in the blank – shoemakers, dry cleaners, widget makers…)” and that this is all they will ever be. This will instill great pride and confidence that life is about tradition and not about pursuing their own dreams and definitely not about reaching their full potential. Talk about how Henry Ford should have followed in his father’s footsteps as a farmer and Steve Jobs in his father’s footsteps as a restaurateur.
Tell your children that the only reason you work so hard is so they will have a guaranteed job waiting for them when they graduate from school. Definitely do not let them work outside the family firm, for that will only build their self-confidence and fill their heads with crazy ideas about how other firms succeed in a changing world.
Some children who have watched their parents struggle and work hard at their business express a desire to pursue a different path. Mothers can play an important role in dissuading them from doing this by encouraging their husbands to hire the children (especially sons) and over-pay them for jobs they do poorly. This way, you can keep your children close and your grandchildren even closer. When this plan is in place, sit back and watch that special bond between a mother and daughter-in-law blossom – it’s really indescribable, especially when a son and his wife have no options because they could never replace their current salary elsewhere, especially when their only work experience is in the family business.
Always tell your non-family employees that there are two sets of policies and procedures – one for family and one for everyone else. This way, when your children show up for work at 11:00 a.m. (when they show up at all) and leave at 2:00 p.m., everyone will know they are following the rules and earning their bonuses. This is a fantastic technique for attracting talented non-family employees and retaining them for up to six months. The idea that experienced, long-serving employees are valuable to a business is highly overrated.
If you happen to be lucky enough to have one of those children who actually works harder than you – I mean really works long and hard – make sure you never discuss selling the business to him (and definitely never sell to a daughter, especially if she has an MBA). It’s always much better to leave your son – and your entire family – assuming that he will inherit the business. Hint at this plan but never really commit. Think of the excitement when your other children learn only when you and your spouse have died (likely when you’re both in your nineties) that in the spirit of fairness, you have left an equal number of shares to all the children. There is nothing like brothers and sisters becoming business partners late in life and working shoulder-to-shoulder, especially when one is married to a lawyer. Remember to keep your real business succession plan a secret – surprises are what make families strong.
Instill in your children the idea that a business is not about making money but rather about staying in business at any cost – the older the business, the better. Old is good! You can make this point by talking about how bankers will always lend money to an old family business to support its growth. But steer clear of examples involving buggy whips, slide rules and BlackBerries – they are just anomalies.
It is important to concentrate all your wealth in your business, especially as you near retirement. When you make money, reinvest it in your business year after year and tell your children that this is the full extent of your retirement plan. Tell them that when you die their mother will inherit the business and that she will need all of their help running it. If all goes well, the business will fail and everyone will gather round and reminisce about what a magnificent businessman you were – after all, clearly only you could run it profitably. This is okay because remember: you are dead and no longer require money.
Definitely do not write a will. Some of the best family moments come when everyone testifies in court and offers his or her own version of what you really wanted. Why deny your children an authentic Darwinian moment? Why deny them the sheer joy of learning who you really were as they riffle through your personal papers and slug it out mano-a-mano in open court? This makes for great front-page reading in your local paper. If you insist on a will, definitely do not get professional help writing it – those $9 do-it-yourself will kits are awesome and take only 10 minutes to complete. But remember, that’s 10 minutes of your life you’ll never get back.
For centuries, “comprehensive planning” for most families has consisted of two elements: financial and estate planning. And for centuries, 90% of that planning has failed when measured by the objective of helping the family to retain both their family unity and their assets for more than two or three generations.
This is not a recent phenomena. Since ancient times, the majority of inheritance plans have failed. Two thousand years ago a Chinese scholar penned the adage: “fu bu guo san dai,” or “Wealth never survives three generations.” In thirteenth century England they said “Clogs to clogs in three generations,” and in nineteenth century America the expressions became “From shirtsleeves to shirtsleeves in three generations.” And, over 200 years ago, Adam Smith – of “specialization and division of labor” fame – summed it up in “The Wealth of Nations” when he said: “Riches, in spite of the most violent regulations of law to prevent their dissipation, very seldom remain long in the same family.”
The basic principles of most of the Inheritance Planning today were put in place by King Henry VIII nearly five hundred years ago
This three generation cycle is not news to financial and legal professionals. Ask a room filled with advisors how many have seen families torn apart by issues surrounding money and inheritance, and you will see every hand shoot up. And yet, traditional, two-element planning continues to be the dominant framework within which most people prepare for their futures. (By the way, when we say ‘traditional,’ we mean it: the basic system of inheritance planning used in the Western world today is not much different than it was in 1540, when England’s King Henry VIII pushed his Statute of Wills through Parliament and set in motion many of the processes and procedures we use to this day!)
Change comes slowly in the world of planning. The most significant changes since the 16th century have come about in just the past quarter century. In the mid-1980’s, Bob Esperti and Renno Peterson formed the National Network of Estate Planning Attorneys with a goal to “Change how America Plans” to use Living Trusts and avoid probates in even modest estates. Within 10 years, the Network had grown to over 1,500 members, and Living Trusts were becoming the norm in all estate plans. The National Network of Estate Planning Attorneys helped change the way America did its estate planning; which was a wonderful accomplishment.
But, they still did not transform how America plans. That is the goal of heritage planning, and the increasing number of advisors, non-profit officers and educators around the world who are introducing the 3rd Element of Planning to their constituents.
Do you have a Chief Legacy Officer? by Family Wealth Coach
No, that’s not a mistake in the title. But we wouldn’t blame you for thinking that, because Chief Legacy Officers are a relatively new idea.
We get lots of feedback about how much the “values and vision” concepts in our blogs resonate with readers. We can imagine though, that with everything else that’s going on in your life, it can be difficult to implement some of those ideas as effectively, efficiently and directly as you’d like. That’s where the Chief Legacy Officer comes in.
The idea behind the “Chief Legacy Officer” originated from the Family Office Exchange. It’s an idea that we’re enthusiastic about because a Chief Legacy Officer is to values and vision, what a CEO is to executive decisions, and a CFO is to financial decisions. We firmly believe that decisions about values, vision and mission play as crucial of a role in your business and family office as the executive and financial decision-making aspects. After all, there needs to be a driving reason behind making those executive and financial decisions.
A Chief Legacy Officer can help to define governance structures, and can be designated to implement some of the important concepts that we’ve discussed in past blogs such as engaging and educating the next generation.
This isn’t a fluffy role; it should be taken just as seriously as the selection of a CEO and CFO. However, one difference to consider between those roles and a Chief Legacy Officer is that experience isn’t always an asset. Leaving this role to the first generation can have risks. Incorporate the second and third generation’s views. The first generation’s take on all of this is great, but it will fade with them if the younger generation’s views are not also considered.
Incorporating a Chief Legacy Officer gives you the opportunity to focus attention and energy on all angles of your family business and estate—not just the obvious ones.
Epigenetic Transformation: You Are What Your Grandparents Ate: Pamela Peeke
A New York Times bestselling author, Dr. Peeke’s latest release, The Hunger Fix, is the first consumer book describing the newly emerging science of food, addiction and epigenetics. Dr. Peeke is founder of the Peeke Performance Center for Healthy Living, guiding people through the mental and physical transformations of their life journeys.