I promise not to re-visit the old phrase about “when you assume…”, but the adage is unarguably true when it comes to family businesses.  Somewhere in the middle of the vast majority of conflicts in family-owned businesses is the failure to simply ask the right questions.  There is a lot of hope and a lot of wishing, when it comes to exit strategies and plans for succession.  Ultimately, there is a lot of hurt and disappointment because of the lack of communication.

From the standpoint of the most senior members of ownership, these questions are often not asked:

1.  If something happened to me tomorrow, who would take over the company?

2.  Have I/we sufficiently informed all of those who need that information, including the heir apparent, the key employees, the trusted advisors, and the family (including all of those who may have been in the running themselves)?

3.  Have I/we provided the proper training to the incoming leadership?

4.  Have I/we really asked the heir apparent if he/she really, really wants this responsibility, from the marrow of his/her bones, or are they just doing it out of a feeling of obligation?

5.  Have I/we prepared our own exit so that our retirement will not unduly burden the company’s future cash flow and ability to prosper?  In other words, have we diligently set up a source of income outside of the operational funds of our family business?

6.  Do I have the will to really turn my business over to the successors freely and confidently, with an understanding that I have to really let go?  (All the more reason for #5 above to be in place).

Those are just a few questions from the exiting generation.  What about the incoming generation?

1.  Do I really have the passion, desire and abilities to make this company prosper during and after the transition?  Is this my own dream, or do I feel an obligation to the family?

2.  Have I shown the initiative to educate myself regarding the inner workings of the company, it’s industry, and proven myself to those I will have to lead in the future?

3.  Do I fully understand the politics of the family and the business, and done everything possible lay the grounds for a smooth transition?  Am I prepared to deal with the conflicts that may arise from those who felt they should have been in my position?

4.  Most importantly, have I taken the time to ask those who will be ceding authority all the questions I can to determine all the factors they are “assuming”, prior to executing their exit?  In other words, have I asked the actual question, “When and how will you plan for your exit, and what are your desires and plans for the company if you were to be gone tomorrow?”

Tough questions, all ten of them.  But, let me ask you this… Is that tougher than asking, when it’s too late, “Why didn’t I ask…?”

As my father used to say, “For crying out loud!”

George Eastman started his company in April of 1880.  His interest in technology was the key to his budding success.  Photography was definitely not the hobby of the masses.  As is true of so many entrepreneurs, the ability to bring a product or service to the public in affordable and simple doses is often the key to success.  The dramatic change in technology which has made much of Kodak obsolete happens all around us.

So, what about the legacy?  One of my favorite authors on family businesses, Tom Deans, makes the point repeatedly that the legacy of a family business lies not so much in its product or service, as it does in the wealth created by the business.  In other words, the legacy.  Businesses are created to serve existing markets…emerging markets in many cases.  But, over time those markets change.  Tom Deans’ book, “Every Family’s Business“, makes the point that the legacy can continue long after the “business” is gone.

George Eastman’s Kodak company has certainly been a model of longevity.  Whether the company remains relevant, or even continues to exist, is not my point.  The legacy left by George’s company will exist forever.  During his lifetime, Eastman Kodak contributed tens of millions of dollars to educational institutes, such as the University of Rochester, Eastman School of Music, Tuskegee Institute, MIT, Hampton, and more than a few dental and children’s medical programs worldwide.

Although my target client is small to medium sized family-owned businesses, the concept remains the same.  While the goal of succession, often within the family, is admirable, I want to make sure that those owners are keeping an awareness of the legacy they would like to pass on.

I picked up the phone and called some of my company’s advisors, our CPA, our attorney, as well as others who make their living providing services to closely-held and family-owned businesses.  While I admit that it’s not a scientific polling, I was surprised by their virtually unanimous opinion…

Their point…They would much rather spend their time and effort working with business owners to increase their bottom line, enhance their efficiency and effectiveness, and maximizing the ability for the owners to realize their dreams of a legacy.

So, why am I bringing up the tax system in a column that deals extensively with family-owned businesses and their success?  Well, here it is…

If you are currently using advisors (attorneys, CPA’s, financial analysts, bankers, consultants, etc.) who do not have the above-mentioned goals in working with you, it’s time to fire them.  The best advisors do not relish wading through the muddle of nonsensical, unproductive regulations and red tape, just so they can get paid.  They have your legacy and goals as their overriding purpose.

Unfortunately, our government-produced maze of mayhem requires their attention. Until that changes, only the best advisors will venture past the required task of pushing your company through the landmines of bureaucracy.  So maybe it’s time to ask a few questions of your trusted advisors.

1. Do you fully understand where I want my business to be in the future?
2. Are you able and willing to guide me along the way to that goal?
3. Do you understand that, in my family-owned business, it is vital to understand that my legacy is not only for my business, but for the health and wealth of my family?

Those are set up as yes/no questions.  But, don’t let it stop there.  Ask for details.  Dig deeper for answers.  Make sure that you give them the feedback so that they remain a vital part of your team.

The flat tax would indeed lessen the need for advisors to spend unproductive (but profitable for them) effort on regulations.  The best advisors will be those who look past the necessary “have-to-do” work, and will concentrate on helping you maximize your family/business legacy.

That is their real job security!

My wife & I decided to visit the establishment last Saturday night.  The restaurant is located in an out-parcel of a neighborhood shopping center.  Obviously, the restaurant had gained some level of notoriety because of the Food Channel episode, which evidenced itself in the huge crowd, filling the parking lot.

We were lucky, though.  Next door to the restaurant was a tanning parlor franchise, Palm Beach Tan.  We pulled into a half-empty parking lot, and as we exited the car, we saw a sign that said the parking was only for patrons of the tanning parlor.  Violators would be towed away, at the violators expense.  Since it was late Saturday night, and there were more than a couple of dozen empty spaces in that lot, I stepped inside Palm Beach Tan to ask the receptionist if that policy was in force at that time.

She sheepishly told me that it indeed was in place, and seemed sympathetic to me…and seemed frustrated with the policy.  She told me that she would be fired if she didn’t call the wrecker service.  The owner, “Scott”, apparently ranked the issue a top priority.  Of course, I proceeded to move my vehicle to another spot, not under their purview.

As we took a seat on the outside waiting area at the Hungry Owl, we saw another vehicle pull into our former parking spot.  As the gentleman approached the restaurant, along with his family, I warned him of the threat of being towed.  He simply shook his head, thanked me and continued into the restaurant.  Within 5 minutes, a wrecker showed up and backed up to one vehicle, engaged it, and began towing it away.  I had never really seen that operation, and I was truly amazed at the speed.

I was even more amazed at the speed of the other violators, as they ran out and started moving their vehicles out of the parking lot.  The wrecker was able to tow a second vehicle, as the others scrambled to avoid capture.  Very quickly, the entire tanner’s parking lot was down to two vehicles, presumably the one worker I met and one patron.  At least 80-90% of the parking lot was vacant.

This brings me to my topic.  (Finally, you say…).

I wonder if “Scott”, the Palm Beach Tan franchise owner had any idea that he had alienated at least 50-100 potential customers, along with all of their friends and acquaintances.  I did a little “man-on-the-street” investigative reporting on my own, and from my limited scope, found that the parking lot was only rarely fully occupied, especially during the peak nighttime dining hours.

I discussed the situation with the owner of The Hungry Owl, Tony Nicholas, who had made several efforts to remedy the situation, to no avail.

I don’t know why I got so involved in this, except that I’m sure each side could easily benefit from cooperating.  Clearly, the loser, besides those who ended up paying a towing company to retrieve their vehicles, is “Scott” and Palm Beach Tan.  I wish he could have heard the descriptions of what kind of *!@#$%^&* he and his business must be.  I can only hope that it would matter.

By the way, our food was delicious, and Tony seemed to be the kind of entrepreneur I will continue to support!

One of the most important exercises we practiced was the development of the questions we needed to ask, in order to get the most useful information from our clients and all of those involved in the family business.  Since we had members in our “professional consultant” group from various core disciplines, it was interesting to see how the team came up with the proper questions.  What resulted was an amazingly effective list, which elicited key responses from our test clients.

In one of the exercises, we were allowed to ask only one question on four different topics.  What we found is that, without follow-up questions, our ablilty to discern useful feedback was severely limited.  Without the ability to ponder the first responses, it was very difficult to clarify the intentions of our interviewees.  In fact, during our daily conversations, in real-life, the first question is often a set-up, meant to get attention so that the follow-ups can dig up the real answers.

We’ve all watched untold numbers of presidential press conferences over the years.  I remember that there was a time when reporters were only allowed one question each.  For the most part now, many reporters are allowed at least one follow-up.  Of course, one of the top requirements for a follow-up question, is that you pay attention to the answer to your opening question.  This inattention has manifested itself in so many ways, but we’ve all heard the courtroom banter when an attorney doesn’t really listen:

The best parts of our exercise during the case studies were the discussions on what to ask, how to ask, and when to ask.  In every case, listening to the answer, how it was answered and when it was answered was every bit as important.  Thanks to my partners, I thoroughly enjoyed those exercises, as did they…or at least, I think that’s what they said?!?