Maximizing Your Family Business Advantage Dr. John Fast Family Enterprise Solutions

Family Businesses are the Best It might not be easier to run a farm business with family members. But when family businesses work, they possess an inborn competitive advantage no other company can match. INC, March 1992 It might not be easier to run a farm business with family members. But when family businesses work, they possess an inborn competitive advantage no other company can match. INC, March 1992

Succession Statistics 30% of family businesses make it to the second generation. 15% make it to the third generation. 5% make it to the fourth. 30% of family businesses make it to the second generation. 15% make it to the third generation. 5% make it to the fourth.

The Crisis in Canadian Family Farms Over 80% of family business failures can be attributed to the unawareness of and/or inability of business families to address family dynamics. Inattention to Family Dynamics

Defining Success in Family Firms Family Health Optimization Estate Wealth Maximization Business Risk Minimization

The 3 Circles of Business Families Business families face enormous complexity Often results in role confusion or conflict Business families face enormous complexity Often results in role confusion or conflict Role Confusion

Genuine Choices in Family and Business Business Functioning Business Functioning Family Functioning low high fused independent A A B B C C D D

Why Founders Can’t Let Go 8.People die soon after retirement. 7.I hate gardening, golf or tennis. 6.I need someplace to go. 5.The kids want to change the way the business is run. 4.I have several capable kids and don’t want to have to choose one to succeed me. 3.The business is my major source of income — I need to protect it. 2.Nobody can run the business as well as I can … without me, the business is nothing. 1.Somebody may run the business better than I do … without the business, I’m nothing. Dr. John Fast 8.People die soon after retirement. 7.I hate gardening, golf or tennis. 6.I need someplace to go. 5.The kids want to change the way the business is run. 4.I have several capable kids and don’t want to have to choose one to succeed me. 3.The business is my major source of income — I need to protect it. 2.Nobody can run the business as well as I can … without me, the business is nothing. 1.Somebody may run the business better than I do … without the business, I’m nothing. Dr. John Fast Top 8 Reasons

The Impact of Trust and Mistrust Feelings of comfort and security A culture of fairness Optimism about the future Loyalty and commitment Vision of the common good Increased motivation More effective communication Higher productivity Ownership and accountability Spirit of cooperation and respect Higher quality relationships Feelings of anxiety and insecurity Misuse of power Uncertainty about the future Eroding loyalty and commitment Self-interest/personal agenda Decreased motivation Less sharing, listening, openness Lower productivity Self-protection and blaming Unhealthy competition Increased conflict High Trust EnvironmentsLow Trust Environments

Succession Plan Template 1. Exploration Determine facts of the situation Clarify objectives of all family members in each circle 2.Diagnosis & Information Assess compatibility Identify difficult conversations 3. Presentation Inject new ideas Explore creative solutions 4. Instruction: Introduce “Certainty” Define a critical path Determine necessary commercial agreements 5. Implementation Strategic Business Plan Contingency Plan Leadership Succession Plan Ownership Succession Plan Shareholder Agreement(s) Estate Planning