The Family Challenge Techniques and Tools for Assisting Family Owned Businesses Presented by Lisë Stewart, Managing Director ~ Galliard Group And Jane Johnson, Partner ~ B2B CFO

Why Now? 24 Million… The number of small businesses in the US today.

95% of businesses in the US today are family-owned or closely-held. 80% of those businesses have 20 or fewer employees. However, these businesses are responsible for contributing over 45% of our GNP (Gross National Product)!

So, they… generate more new products; create more new jobs; and contribute more to your local communities… than their corporate counterparts! But, it’s not easy…

65%... The number of business that will transition ownership or leadership within the next 5 years…

Almost 35% sell or liquidate – often failing to realize their intended value. Growth Time Comfort Hard work Liquidation Wonder Blunder Thunder Plunder/Wonder Adapted from: Beyond Survival – Leon Danco

85% of American Business Owners state: “I want to pass this business on to the next generation” Sadly, fewer than half have the opportunity to do so…

The Myth You can take the ‘family’ out of the family business.

Change with Dignity A successful, well planned transition will provide opportunities for enrichment and joy and the chance to change the course of one’s life with dignity.

This is an INTEGRATED process Initial Meeting FBA FBA Feedback Prelim Exit Strategy Prelim Succession Planning Strategic Planning Succession Plan Confirm Exit Strategy Confirm Advisory Board Development

Jane Johnson, Partner B2B CFO

How can I improve my chances for a successful exit?

It’s time to plan

Better prepared = Better value

What is an exit strategy? The written goals for the succession of a business’ ownership and control, derived from a well thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and a time period that is accommodative to the business, its shareholders, and potential buyers.

Why do I need an exit strategy?

What is at stake? Your hard-earned wealth can be diminished by: Changes in your business Changes to the global economy Lack of a Successor Income & Estate Taxes Deal Structuring & Advisory Fees

Timing Matters! Provided by Rob Slee

How do I create an exit strategy ?

Vital Steps

Define my goals Assess my personal & company readiness Understand my options

What do I want to achieve?

Am I my business?

Do I treat my business as… InvestmentLifestyle

Am I financially ready?

What is my number??

Is my company fit ?

How can I maximize company value?

Profitable Sustainable Transferable

What are my options for exiting?

Management buyout Employee Ownership Private Equity Group

Give it away Sell it Grow business

Only 20% result in a successful sale

What other issues should I consider?

Family Estate Employees Taxes

How can I improve my chances for a successful exit?

Prepare the company Align personal & business goals

How do I get help?

Find the right advisors Chart my course

Remember…

of business sales are unsuccessful 80%

to build value prior to the exit You need

an exit strategy to be in the 20% and achieve your goals! You need

"You always say 'I'll quit when I start to slide,' and then one morning you wake up and realize you've done slid"! ~ Sugar Ray Robinson, 1965

How to tell you are NOT ready for retirement

You have no or few hobbies outside of work. Your best friends are people at work. All the social functions you attend are work related. You are proud to be a workaholic! You have always disliked your work and think retirement will make you happy. Planning a vacation is more fun than taking it.

Define your Vision and Develop the Plan

WHAT do you want your business to look like in 5 to 10 years? - Growth, sustainability, increased value?

Business Needs Strategic Planning Family Needs

Build Your Bench

Identify the competencies needed for successors Define the role of the existing leader as a mentor or coach Provide experiential training for the next generation Identify measures of success Start early!

Focus on behavioral competencies and technical skills – not entitlement, relationships, or convenience. Identify cultural fit – with the organization and, if applicable, the family. Use behavioral/targeted interviewing and leadership assessments.

Remember: Managerial ability is more important than birthright.

Advisory Boards

Identify subject matter experts who can add value and support to the organization. Create an Advisory Board made up of both family and non-family members who can genuinely contribute useful, practical advice for successfully growing the business.

Select members according to strategic goals – not friends or family members. Be clear about expectations. Invite members for a 1 year term. Consider using a facilitator. USE the advice you are given!

Encourage Communication Honor the Family Plan for the future Recreate Wonder

How can you effectively market these services. What does the process look like? What does the pricing look like? What is YOUR return on investment? The Family Business Advisor

Our Role… Help to create sustainability – for the company and the family. Keep those jobs in your local community. Demonstrate commitment to both the business and the family that owns it.

Building Trust and Gaining Business

Know your target audience The Family Business Assessment can open the door Baby steps work best Trust is key Integration of services makes it work.

80% of family-owned businesses have fewer than 20 employees. This market is grossly underserved. Most of these companies are reluctant to hire consultants. Their dignity is in our hands.

“The purpose of this process is to ensure that you, the business owner, can reap the financial benefits and earn a fair return on your investment for a life-time of hard work.” The Value

Remember… This is an INTEGRATED process Initial Meeting FBA FBA Feedback Prelim Exit Strategy Prelim Succession Planning Strategic Planning Succession Plan Confirm Exit Strategy Confirm Advisory Board Development

Carefully crafted, easy-to-read, practical reports are generated for both the Client and the Advisor, and cover six key areas : Strategic Planning Financial Management Workforce Management Family Governance Succession Planning Professional Advisors Family Business Assessment

The Baby Step Approach

Identify logical first steps (not necessarily low hanging fruit). Break the step down into manageable bits – in terms of activity and cost. Write simple Scope of Work documents that describe the activity and the outcome. Only agree to move to the next step after the ‘process review’.

This is a partnership – stress that it is primarily about the CONVERSATION. You will move from a tactical expert to a trusted advisor. The process review is an important check in – you cannot measure impact in quite the same way. Trust is Key

The steps fit together and the flow is logical. Success happens only when the needs of the family are integrated with the needs of the business. An holistic return on a life-long investment is the ultimate aim. Integration makes it work!

Leave a Legacy

Family or closely-held businesses will endure or die depending upon how effectively they plan for the future. Those who survive will have managed to re-create the energy and wonder that fueled the original entrepreneurial spirit.

Resources John Leonetti: “Exiting Your Business, Protecting Your Wealth” Bruce Wright: “The Wright Exit Strategy” William Bridges:“Transitions” David Corbett:“Portfolio Life” Rob Slee: “Midas Managers” James S. Rigby: “Driving Your Company’s Value” Gino Wickman: “Traction: Get a Grip on Your Business” John Warrillow: “Built to Sell”

Thank You! Lisë Stewart, Managing Director Jane Johnson, Partner

Copyright Notice Slides 15, 17, 21, 25, 31, 32, 33, and 34 of this presentation and many of the comments and commentary constitute or contain copyrighted material owned by, and used with the express permission of, John M. Leonetti. This material appears in the book “Exiting Your Business, Protecting Your Wealth – A Strategic Guide For Owners and Their Advisors” (Wiley & Sons, 2008) written by John M. Leonetti.