Bottom Line

You have identified some gaps in whether you are a healthy family enterprise, so what now? What is the bottom line? When you think of this question are you only taking yourself in consideration or are you including others – such as your family? Is your bottom line financially based or is it much more that that?

There are certain characteristics needed to be a healthy family enterprise. This article will outline what they are and some questions worth asking to achieve being a healthy family enterprise.

When I think of “the bottom line,” I think of it in two ways: First, in business and personal finance, we make decisions based upon what we imagine the impact will be on our net profit as represented by the number on the literal bottom line of a financial report. The second way is a bit warmer and fuzzier. The term “bottom line” also means the crux of the matter. The most essential point. The primary consideration. We increase the odds of success when we know our intimate reasons for doing what we do. Knowing our why. Diving deep into connecting with our core values.

Too frequently in a family enterprise, the focus is on the growth and bottom line of the business and not on the vision, goals and values of the family. What does your family place in the center: the money or the family?

In the field of Family Enterprise Advising and working with families it is important to define if the family is a family enterprise. Not all families with a business are on the road to be family enterprises, and that is ok.  It is also important to note that a family enterprise is much more than just the families operating business. It manages financial assets, real estate, heirloom assets, philanthropy, life insurance, human, intellectual, social and spiritual assets too. Having a clear vision of where the family is heading with its family business and the family assets is important.

As a family if the decision is to be a family enterprise and you are ready to commit to creating a continuity plan and prepare the rising generation to be part of this relay race of passing on the baton and successfully transition wealth to the next generation then there is work to do. It takes commitment and intention to achieve the characteristics of a healthy family enterprise.

As a reminder, the characteristics of a healthy family enterprise include:

• Communication is open and clear
• Family has the ability to resolve conflicts
• There is high trust between family members
• Goals and values of the family are clear
• Boundaries between family and business are clear
• Succession is planned early
• There is a functioning independent board of directors

To be clear, if you want to transition wealth from one generation to another, you must communicate, make decisions together and resolve conflict together. It takes time and commitment and is hard work.

You will face obstacles and often when this road begins there will be numerous times you will feel like the wheels are spinning and you are getting nowhere. As one family described the process “we moved as quick as molasses.” My suggestion is, don’t give up! Keep moving forward. Hire someone who can keep you accountable to making a plan and executing it.

Some common obstacles a family enterprise can face are:

• There are no clear boundaries between the family and the business
• Sibling rivalry
• Family members free ride, often the next generation
• There is resistance to change from the senior generation
• There is resistance to letting go from the senior generation
• Expectations are not articulated

On the other hand, working through a process, even when progress is too slow to be noted at first, can bring many advantages. These advantaged include:

• Having a strong legacy and value system
• Accountability
• Direct communication
• Quick decision making
• Family culture
• Committed family and nonfamily employees
• Generational time frame
• Family identity and pride
• A long term orientation
• Strong culture and traditions

There are many paradoxes to being a family enterprise.  We will touch on some of them in future articles.  What’s important to note is that it is not all or nothing. It is not either or. The beauty is finding the balance to manage both and to take on a “Both…And” mindset.

As a family enterprise it is important to ask some deep powerful questions. One of them is what mindset do you hold for your bottom line? And “Are you willing and capable in building the characteristics of a healthy family enterprise?”

These articles are meant to give insight and ask yourself are you on the right road for you family and family business. We hope the journey ahead provides the education needed to make some sound decisions and note its never too late to take a step back and re-evaluate where you are. Do you have all the right pieces in place for a successful continuity plan to achieve being a multigenerational family enterprise?

Decision Tree Question: Are you willing and capable to build these characteristics?