Lisë Stewart - Coming Crisis of the Family Business (E2317)

Hi, this is Bill Black from the Exa Coach Radio show on Sundays. Last year, a business owner friend of mine died suddenly and tragically, and his family was unprepared. In his honor, I'm giving away 1000 of my e-books entitled Business Continuity, Five Steps to Protect Your Family free. All you have to do is text the word family to 44222. That's family to 44222. Don't let your family be the victim of an unplanned business. Text family to 442-22 for this free information today. Welcome to the Exit Coach Radio show, the show for baby boomer business owners who are looking for cutting edge information as they plan their 3 to 10 year business succession and exit. Every week we interview top professional advisors. Their best tips, strategies, and precautions so you can be well planned. And don't miss our one minute exit coach tip of the day on exitcoachradio.com. And now here's your host, the exit coach Bill Black. Hey everyone, thanks so much for joining us today. It's always a pleasure to have you with us. We've been having some terrific guest interactions today, and it's we're going to continue now with someone who is going to talk about something that affects many, many of you, your relationships in your family. Business and let me introduce Lisa Stewart. She is with the Galliard Family Business Adviser Institute. She's the executive director and founder of that institute, and they were founded to ensure that small family owned and closely held businesses across the country. Have access to the help you need to keep your business thriving while you undergo significant transitions in leadership. Does that sound like it hits home with any of you out there? So Lisa is going to be talking about why this is so important and the potential coming crisis of the family business. So Lisa, thanks so much for joining us and welcome to the show. Thank you, Bill. It's really nice to be here and it is a hot topic, so I really appreciate the opportunity to talk. It's a hot topic. It goes kind of hand in hand with our last guest who was talking about managing stress, so it's perfect because I can't think of anything more stressful than a room full of people in the leadership and the family members of a family business getting together when things aren't going well. Um, but let's talk about you and your background and how you started the Galliard Family Business Adviser Institute and what it is. Let's start there. OK, well, you know, it actually started a long time ago. I've been working with family owned and closely held businesses, small businesses, for about 32 years, and when I came back to the United States after working overseas for quite some time, um, I came back about 1517 years ago, and found that here in the US, uh, there just did not seem to be enough resources for small family businesses, you know, large family businesses and for the most part are well taken care of. There are a lot of wonderful resources out there, but they're really expensive and a lot of times the um programs and services that they offer are just above the level of where we find many small businesses need to have these programs pitched. So as we were looking around and trying to figure out how we could combine our skills and our services with other organizations, we just weren't finding any. So in about 2004, a group of us got together and said we really need to start to put together a collaborative to help small family businesses get access to the help that they really need, and that's how Galliard and the Galliard program was originally founded. And we began to reach out to other advisors and experts around the country and ask whether or not they would be interested in trying to put together a methodology that met the very unique needs of these small businesses that was priced accordingly, that was delivered in such a way that it didn't take them out of their working environments for too long, that it was done in such a way that they felt empowered and could learn how to do many of these things themselves. And it was also done so that we can bring in a range of professionals. There's no one adviser necessarily who can do everything that a small business needs. So as we started to grow and we were bringing more people into our national network about 4 years ago we actually formed the Institute, which is a not for profit organization that provides education, training, support, and so on for people who work in this industry, for people who are particularly passionate. About making sure that small family owned and closely held businesses get access to the help that they really need and in particular we're very good at reaching out into smaller rural areas, parts of the states across the country where help just really isn't generally available. And so we're committed to trying to find ways in which we can share information virtually that we can find local people who may not necessarily be experts in and of themselves but are willing to work with the rest of us in order to bring these resources. So it's been a fantastic journey and I have to say we're now across the US, I think the largest provider of transition services with all the people, the many hundreds of people that we have in our network, and we continue to grow every day. But there's still a lot more to be done. This is a very, very big market and the need is great and so we're so delighted to have the opportunity to come and talk to people like you and your listeners and tell them a little bit about what's available and why this is just so important today, particularly today. You know, this, this really crosses so many lines of, of, uh, of need, and there's, there must be, I don't know, uh, what, what's, do you have an idea for the number of family involved businesses out there? Yes, I do. In fact, you know, the, the, uh, statistics are pretty surprising, staggering, really. In the US today there's somewhere between 20 and 24 million small businesses. We know that of those small businesses, about 95% of them are either family owned or closely held. That means that the ownership is still with people who are actively engaged in the business as opposed to outside investors. So it's a big number and then when you think about that, about 80-85% of those businesses have fewer than 20 employees so we really are a nation of very small businesses, but I think that what's even more surprising, the reason that we talk about this this coming crisis of the family business. Is it report after report has shown that in the next 3 to 5, some say 7 years. We can see a transition and leadership in about, oh, over 50% of those businesses in some cases. And a transition in leadership and ownership. It's a crucial time for these businesses, and many of them are not going to survive. Within 2 to 3 years of that significant transition. Many of these businesses are gonna hit the wobbles. And then they're going to fail. And from a national perspective, that is a very serious situation. And yet not enough people are talking about it. Not enough people are aware that with all of us baby boomers aging out and getting tired and starting to think about the next phase of our life, most of us don't have a plan for what we're going to do with those businesses, and that's why it's become so important. What's the biggest myth that's out there that you see or the biggest thing that people just have wrong, and I'll give you an example. I've heard a lot of people say that they think that their succession plan is just about choosing the next line of leadership as an example. What, what do you see as the biggest misnomers or mistakes people are mistaken ways people are thinking about this situation? Well, there's a couple, and a few of these myths are really being perpetrated by people who I think might benefit from the myths as well, and one of them is just what you talked about this belief that somehow succession planning is all about finding somebody to buy the business, whether that somebody happens to be your son or daughter. Who's going to buy you out and provide you with the money that you need to retire or if it's an outside buyer. So you know there are a lot of um brokerage firms, you know, business brokers out there who will say that they specialize in succession planning and what they specialize in is finding somebody and helping them to come up with the money to buy the business. That's not succession planning, that's a transaction. Succession planning is about planning for the long-term success of that business. It's not just one person, it's often multiple positions and understanding the type of bench strength that you've got to have in place to make sure that the business is strong, that it can carry on without you. So I think um that's an important myth. And the other one I think that people get confused about or are often surprised about. Is that the sale of the business is not necessarily. The events that people expect it to be. That means there's 80% of people out there that have gone through this significant transaction and are actually unhappy with the transition, whether it means that they didn't get what they expected financially, the company didn't end up being worth what they thought it was going to be worth, or just the transition itself was really difficult, you know, sometimes people will agree to stay on and work in the business now that it's under somebody else's ownership. That can be so difficult to do when you have somebody else who's finally taking over and running your baby and they're doing it in a way that you would never have dreamed of doing it, maybe treating your employees or even family members in a way that doesn't sit well with your values. So a lot of times people are disappointed by the way in which the entire transaction and the transition itself occurred. So I think that part of this stems from people just not getting access to the information that they really need to make sound decisions and to be really prepared for what this is going to turn out to be. So it's, it's really tough and we've got to do a much better job of helping people to understand for themselves what they want to get out of this, have a better idea about what the entire transaction might look like, and to know that this is a journey. This isn't just about what you do with the business. Also about what you do with the rest of your life and how this is going to impact your family, your employees, and in many cases, your local community. So it's a big deal and there's a lot that goes into the thinking. That's a very well put, and I was just recently at a meeting of business owners sponsored by a big business group out here and around the table were a bunch of younger family business members, and they were all talking. We went around the table. One of the biggest issues and the biggest issues was how do we get How do we transition mom or dad out of this, uh, so that we can finally take over and and run with the company and it, you know, I, I can imagine there's a lot of There's there's another table of a lot of fathers sitting around going, what do I do? How do I, how do I transition from from president to chairman of the board and still have a meaningful role in this business but not but not step on the toes of my children. So are those, you know, those issues are huge and like you said they're they're very prevalent out there. Now why don't more small businesses reach out and get the help they need? What do you think the reason for that is? Mm, that's an excellent question and in fact we've done a lot of research on that through the institute and I think that some of the findings are surprising. So first, many small business owners don't trust consultants. Maybe that's not such a surprise, but they actually don't necessarily trust attorneys. They don't trust their, you know, financial advisors, uh, and other business professionals, insurance people, etc. who might be able to help them with this. So we have to start to be able to, to close that, that trust gap, and I'll talk a little bit more about that too. Secondly, many of these small businesses don't feel like they have enough discretionary income to spend money on this. They hear horror stories about how expensive it is in order to get some help to do a really good succession plan and a state plan, you know, some sort of a family council, etc. And while it is true, there are some people out there that charge a lot, there are plenty of ways to get help that, um, you know, that are not nearly as expensive. Another thing that came up a lot is that it's too complex. They know that they're gonna need an attorney and uh maybe a tax specialist and a CPA and maybe a business specialist and sometimes a psychologist or a counselor or something like that and it just feels so complex it's like this is too much. I don't know how to find these people so they back off and do nothing. They've told us they want one trusted adviser, somebody to be the conductor of the orchestra who can really help them with this. And then the area that surprised us the most is the fact that many of these business owners don't seek out help because they're ashamed. You know, most business owners, small business owners in particular, don't necessarily have a background in business or in finance. You know, they figured out something that they love to do and they started a business or maybe they inherited a business and um this is what they know and they know well and they do a great job. But they don't necessarily know a lot about some of the financial aspects of business management or the strategic aspects, and they certainly don't know about succession and transition and some of the psychology behind doing all of these things within the family business that keep it healthy. And because of that they're sometimes ashamed to reach out because they're afraid that when they connect with a professional that person is going to make them feel ridiculous. They're going to point out to them the mistakes that they made, you know, I'll never forget I had a father once um. And he said to me, you know, his kids, they were silver spoon kids and some of you have probably seen the book choking on the silver spoon and I was just taking some notes out of it this morning, and these kids were silver spoon kids and they had a lot of behavioral issues and they were not very dedicated and, you know, um, he was unhappy and he said to me, Lisa. Is it me? Am I the reason my kids turned out this way? I tried so hard to do the right thing. I thought by giving them money or, you know, titles and jobs, that this was good for them. And I could just feel the pain from him, and I had a lot of empathy, so he felt so ashamed because he felt like perhaps he hadn't done a good job raising his kids, but the truth is we all do the very best that we can with the knowledge and information that we have at the time. Unless we can start to get this information out there about how to really do this, of course people are going to be ashamed. They feel bad about some of the things that they didn't know how to do or how to set money aside for their business. Yeah, and their retirement, you know, the average amount that an American business owner has set aside for retirement is about $40,000 outside of the value of their business. That's a shocking number, and a lot of them are embarrassed, yeah, they're embarrassed to admit it. So that's why, that's why they don't seek out help. Yeah, that's a great point is that they, they don't really number one again lack of trust or lack of finances or lack of uh understanding or they just figure, you know, we've always, we've always worked our way through the problems we'll work through this one, or they're or lastly they're just they might be embarrassed about the way things are and they don't want somebody coming in and and changing things up, but that's not going to get them there. How so how does How does Galliard um try to change that with a business owner uh what, what is a an initial contact with someone look like and, and then what does an engagement look like? So let me tell you a little bit about the network and how how we operate and that might help to answer that question. So, um, the institute really focuses on training people who work with small family businesses on how to do this better, how to get our foot in the door by really building trust, making sure that we understand the expectations of our clients, understand what they're going through and their perspective. Uh, we work on helping business advisors to figure out what's really going on in the family business, not to just look at the business aspects, you know, I often talk about how it's easy for a business consultant to come in and to, you know, look at the strategic side of the business, the financial, the marketing, profit loss, cash flow, blah blah. They're good at that. It's easy for an attorney to come in and look at what the family needs in terms of, you know, basic estate plan and how they want to pass the business on to the next generation. Neither side is necessarily looking at the other side, so we need to balance both family needs and business needs, not just one or the other. So the institute really talks about how can we as advisors learn about those areas that are not necessarily our area of strength and figure out when we need to call and help so that we can balance both sides. We talked about the types of projects or services that small family businesses really need if they're going to plan for the future and how we break those down into little tiny baby steps that are affordable and also don't overwhelm these business owners with too much information or too many tasks. And then how do we work in a nice coordinated fashion and make sure that the business owners and the families and the businesses themselves, you know, the employees and so on, get access to the services that are going to get them to whatever the end result that's most important for them. We're really clear about teaching this in a non-judgmental fashion, you know, you said earlier about, you know, the people at the table, the kids saying how do we get mom or dad out, and then mom and dad saying how do we stay in, you know, how do we continue to add value, what's our role going to be? And I always say to my audiences that there is no one right way to do this. What works is what works for that family, and we have to balance the needs of the kids or the successive generation with the needs of the parents. It's really easy for advisors to come in and say, Mom, Dad, you got to get out, you know, you gotta make room for junior or juniorette. They're ready to take over. Well, you know, that may not necessarily be the healthiest thing for either the business. For the family, you've got to start to get creative with this. There are wonderful ways in which you can move the transitioning generation into new roles. You can actually expand their roles, maybe on the outside, the periphery of the business. You can expand into the board roles, and you can actually look at restructuring the business for everybody where you're not stepping on each other's toes. So part of what we teach within the institute is how do we get creative with that instead of just overlaying some of the traditional ways of, you know, business or corporate, um, styles of business, how do we really embrace the unique aspects of the family business and make it work for everybody? It's a dance. It's not always easy to do, but it can be done. That's really what the institute does. If a family's looking for help, they can come to the institute. We have a lot of members that are there. We have a membership in marketplace where they can look through scroll through and try to figure out if there's somebody geographically that really suits their needs. They can also contact the institute and we can put them in touch with people locally who can help them. And then Galileo itself, we do have a consulting arm. We've got a great team of consultants. Anywhere in the country where a family finds they cannot get local help, then we can come in and help them. And we do this in again, short little baby steps. We do a lot of our work virtually to try to keep um costs down. We spend uh time right up front trying to assess the situation. And make sure that we're combining what we do with the help of local experts. So we'll find local attorneys, local financial um specialists, people that we can work with so that they start to build up a network of experts in their own area. It's terrific. So very, very much so. So business owners can benefit a lot of ways and so can professionals by enhancing their training and their their learning about what some of these, uh, maybe not maybe not what the technical issues are, but. The the respect and the caring and the concepts for how to deal with some of these issues that you're going to come up with in every family business and you're going to come up with them in large numbers because of the aging demographics of our country and the number of business owners facing these issues. So Lisa, how do our listeners, um, what, what were you looking for for uh you said uh in in your notes something about finding professionals to join the network and exposing business owners to the network. Can you fill us in there? Yes, so for anybody out there that's listening, if you work with family businesses or small businesses in in any respect, you're touching them anywhere within the business cycle, please come and check us out. It's www. Galliard Institute.org and Galliard is spelled G A L L I A R D group uh Galliard Institute.com. Galliard for those of you that don't know, is a French word, and it means spirited and lively. We are a spirited and lively organization very committed to what we feel so passionate about, and that is saving these small family owned and closely held businesses. So if you're an adviser, come and check us out. We have a tremendous resource. Library that much of it is free to the uh to anyone who comes to visit we do have training courses, webinars, a lot of um information and materials that are available, and we would love to have people join the network so that we can increase this conversation, get more people talking about it, and get more help out to these small businesses that need it. And if you're a family that needs help, come and visit us too. If you need something, there's a high likelihood that we've got somewhere, somebody in your area that can come and visit, and if we don't, we'll make sure that you get access to the resources that you need. This is, this is important, you know, as you and I have talked about before, Bill, we really believe. That the small family owned a closely held business is the economic backbone of this country, and it is also so important to our small local communities all across this nation. We need to come together and start to make sure that these businesses begin to get the attention that they really deserve. We want to make sure that we're keeping the businesses healthy, and we're also keeping those families healthy because we think that it makes a difference and not just to the economy, but really to this whole social fabric of the country. So it's um that's why we put a lot of time and effort into trying to make sure that we're accessible and the very first place to get access to us is through that website. That's terrific, Lisa. It's been really a lot of great information you've shared with us, and I'll just share that I met Lisa in Denver at a conference of exit planners where they deal with a lot of the technical aspects of exit planning, and she gave a speech and every it was riveting the things that That Galliard has brought up to the surface a fit perfectly with technical strategies. So if you're an adviser and you've got all the technical strategies you need, but you really need to talk about the family business, uh, really communication strategies and like we talked about really dealing with the The underbelly of this thing, the life, the lifestyle, all of this kind of type of thing. Get in touch with Lisa, or if you have a business owner group and you want or a professional group and you want Lisa to speak, get in touch Galliard Institute.org and Lisa, I, I'd love to have you back so we can talk in more detail on some of the specific issues that you see coming up. Maybe we can create a little miniseries out of this. It'll be a lot of fun. That would be fun. I would really enjoy it and I so appreciate the work that you're doing too, Bill. It is great to know that you're out there and that you are spreading the good word about the importance of doing this planning. So thank you for having me on the show. It's just been terrific. Thank you very much. We're going to take a short break. We'll be right back after this, so please stay with us. Hey everybody, it's Bill Black, the exit coach from the Exit Coach radio show. One of the questions I get asked the most is how do I grow the value of my business. I'm so busy working in it. I need to work on it. So we've created a special report for you on 10 tips to grow the value of your business. Just text the word drivers to 444222 to get a special free report right to your inbox. That's drivers to 44222. text drivers to 44222. Thank you for listening to Exit Coach Radio.