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The Family Business DilemmaThe challenge of building, growing and leaving business wealth<br />BROWNSTONE<br />Capital Adv...
By the Numbers<br /><ul><li> More than one-half of all owners are 50 years of age or older …
 More than three-fourths of all owners have 50% or more of their personal wealth tied to their business
 More than 60% do not know the value of their business
 More than two-thirds do not have a business succession plan
 70% fail to successfully transition their business to their heirs</li></ul>BROWNSTONE<br />
By the Numbers<br /><ul><li> 76% of all businesses will fail to transition … </li></ul>Owners will sell the assets … and c...
By the Numbers<br />Conclusion … <br />Owners who have been successful at starting and growing their business have not dev...
Business Life Cycle<br />Personal Life Cycle<br />Maturity<br />Renewal<br />Decline<br />Growth<br />Business Life Cycle<...
Business Life Cycle<br />Maturity<br />Renewal<br />HIGH INCOME – LOW  VALUE<br />Decline<br />Growth<br />Start-Up<br />B...
The Challenge of Family Transition <br />Family Owned Business Survey … <br />88% …<br />Transition to family successors<b...
The Challenge of Family Transition <br />88% … desire to make a successful transition <br /><ul><li>Gen 1 – Gen 2: 70% fai...
 Gen 2 – Gen 3: 85% failure rate
 Gen 3 – Gen 4: 96% failure rate</li></ul>BROWNSTONE<br />
The Challenge of Family Transition <br />88% … desire to make a successful transition <br /><ul><li> Gen 1 – Gen 2: 70% fa...
 Gen 2 – Gen 3: 85% failure rate
 Gen 3 – Gen 4: 96% failure rate</li></ul>Owners do a far better job of creating business wealth than in transferring weal...
Business Wealth and Wealth<br />70% … failure … Creator to Successor<br />85% … failure … 2nd Gen to 3rd Gen <br />94% … f...
Business Wealth and Wealth<br />Failure: <br />Following the transition, the beneficiaries lost control of their wealth th...
Business Wealth and Wealth<br />Worldwide phenomena …   <br /><ul><li>“Shirtsleeves to shirtsleeves in three generations”
 “Rice bowl to rice bowl …”
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Family Business Challenge

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The challenge of transitioning a family owned business.

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Transcript of "Family Business Challenge"

  1. 1. The Family Business DilemmaThe challenge of building, growing and leaving business wealth<br />BROWNSTONE<br />Capital Advisors LLC<br />BROWNSTONE<br />
  2. 2. By the Numbers<br /><ul><li> More than one-half of all owners are 50 years of age or older …
  3. 3. More than three-fourths of all owners have 50% or more of their personal wealth tied to their business
  4. 4. More than 60% do not know the value of their business
  5. 5. More than two-thirds do not have a business succession plan
  6. 6. 70% fail to successfully transition their business to their heirs</li></ul>BROWNSTONE<br />
  7. 7. By the Numbers<br /><ul><li> 76% of all businesses will fail to transition … </li></ul>Owners will sell the assets … and close the doors<br />INDUSTRY SECRET<br />Of all the businesses listed for sale … about half will fail to do so!<br />BROWNSTONE<br />
  8. 8. By the Numbers<br />Conclusion … <br />Owners who have been successful at starting and growing their business have not developed the skills needed to transition it to support “what comes next” … <br />BROWNSTONE<br />
  9. 9. Business Life Cycle<br />Personal Life Cycle<br />Maturity<br />Renewal<br />Decline<br />Growth<br />Business Life Cycle<br />Start-Up<br />BROWNSTONE<br />
  10. 10. Business Life Cycle<br />Maturity<br />Renewal<br />HIGH INCOME – LOW VALUE<br />Decline<br />Growth<br />Start-Up<br />BROWNSTONE<br />
  11. 11. The Challenge of Family Transition <br />Family Owned Business Survey … <br />88% …<br />Transition to family successors<br />2003 Mass Mutual Survey<br />BROWNSTONE<br />
  12. 12. The Challenge of Family Transition <br />88% … desire to make a successful transition <br /><ul><li>Gen 1 – Gen 2: 70% failure
  13. 13. Gen 2 – Gen 3: 85% failure rate
  14. 14. Gen 3 – Gen 4: 96% failure rate</li></ul>BROWNSTONE<br />
  15. 15. The Challenge of Family Transition <br />88% … desire to make a successful transition <br /><ul><li> Gen 1 – Gen 2: 70% failure
  16. 16. Gen 2 – Gen 3: 85% failure rate
  17. 17. Gen 3 – Gen 4: 96% failure rate</li></ul>Owners do a far better job of creating business wealth than in transferring wealth to their family … <br />BROWNSTONE<br />
  18. 18. Business Wealth and Wealth<br />70% … failure … Creator to Successor<br />85% … failure … 2nd Gen to 3rd Gen <br />94% … failure … 3rd Gen to 4th Gen<br />BROWNSTONE<br />
  19. 19. Business Wealth and Wealth<br />Failure: <br />Following the transition, the beneficiaries lost control of their wealth through foolish expenditures, bad investments, mismanagement, inattention, incompetence, family feuding, lawsuits, or other causes within their control. <br />BROWNSTONE<br />
  20. 20. Business Wealth and Wealth<br />Worldwide phenomena … <br /><ul><li>“Shirtsleeves to shirtsleeves in three generations”
  21. 21. “Rice bowl to rice bowl …”
  22. 22. “Clogs to clogs …” </li></ul>BROWNSTONE<br />
  23. 23. Business Wealth and Wealth<br />Chinese saying … <br />Wealth never survives <br />three generations <br />BROWNSTONE<br />
  24. 24. Top Level Reasons<br />1. Families fail to understand that preserving wealth is a dynamic rather than a static process. Each generation must be able to create wealth. (Creation – Stasis – Entropy). <br />2. Families fail to apply appropriate time frames for successful wealth preservation<br />3. Families fail to understand that the fundamental issues of wealth preservation are qualitative, not quantitative<br />BROWNSTONE<br />
  25. 25. An Inconvenient Truth<br />The continued emphasis on <br />maximizing the wealth to be transferred <br />has done NOTHING to improve the situation<br />The definition of insanity:<br />“continuing to do the same thing, over and over again, and expecting different results.”<br />Gertrude Stein<br />BROWNSTONE<br />
  26. 26. What Are the Reasons?<br />Poor tax minimization strategies … <br />Poorly designed estate plans …<br />4%<br />4%<br />First Conclusion: <br />The Accountants and Estate Planning Attorneys are doing a great job!<br />BROWNSTONE<br />
  27. 27. What Are the Reasons?<br />1. A breakdown of Communications and Trust within the Family Unit <br />60%<br />Communication = Consists of two root words: common and action <br />Common action brings alignment<br />Trust = Consists of three main components<br /> Reliability: Do you do what you say you will?<br /> Sincerity: Are you becoming whom you should?<br /> Competence: Can you accomplish the task at hand?<br />b<br />BROWNSTONE<br />
  28. 28. What Are the Reasons?<br />2. Inadequately Prepared Heirs<br />25%<br />Williams Group: “… many family leaders devoted far more time preparing their estate documents than they did to preparing their heirs for the impact of those documents.”<br />BROWNSTONE<br />
  29. 29. What About Successful Transitions?<br /> Total Family Involvement <br />2. A Process that Integrates Decisions<br />3. Learning and Practicing New Skills<br />BROWNSTONE<br />
  30. 30. What’s the First Step?<br />Family Mission Statement:<br />What is Our Shared?<br />Purpose of Wealth?<br />For what Purpose has our Family been so Blessed?<br />BROWNSTONE<br />
  31. 31. Contact<br />Paul Brown, Managing Principal<br />Phone: 509-926-6922 (direct)<br />E-Mail: paul.brown@brownstonecap.com<br />URL: www.brownstonecap.com<br />BROWNSTONE<br />
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