Sean Boland Takes Part in Expert Panel of Family Business Advisors at Club Entrepreneur, Minneapolis
All businesses face problems and enjoy successes, but family-owned companies bring unique challenges, including dealing with that overlap. Sean Boland was part of an expert panel of family-owned business advisors at the Minneapolis Club hosted by Rick Brimacomb’s Club Entrepreneur (Club E) and Upsize magazine. Here is a summary of their advice and tips for a successful family business transition.
Sean Boland was part of the panel of family business advisors, offering his expertise and experience related to accounting, tax and business financial management. Also a part of the expert panel were Peggy DeMuse, broker with Sunbelt Business Advisors; Lisa Holter, shareholder with Fredrikson & Byron P.A.; Tom Siders, partner with L. Harris Partners; and Rick Wall, CEO of Highland Bank.
Below is an executive summary of tips and advice. For the full article, click here to be redirected to Upsize Magazine. Photo credit: Tom Dunn
Tip #1: Form a Family Business Council to Guide Through Complex Issues
Rick Wall | CEO, Highland Bank
Rick said, “My father had the foresight to know he needed some assistance, so he hired a consultant to help plan the transition.”
While each sibling technically runs a separate business unit, they tend to be co-owners, sharing experiences and helping each other through difficult times. Initially, they formed a family council that met regularly for several years to discuss issues. That has since disbanded, but the siblings still conduct a weekly phone call.
When everyone is on the same page, he says, family members can really help each other out.
“If somebody doesn’t understand what is going on, it’s hard for them to be with you when times are down,” Rick stated. “Those are things that really helped our family create and maintain some harmony.”
Tip#2: Planning and Communication are Key to a Successful Transition
Sean Boland | Managing Principal, DS+B
Sean Boland, managing principal at DS+B, says if a family does decide to transfer ownership to a second generation, it’s important that everyone knows their role, that compensation is discussed and that egos are in check. Communication is the key. “It can happen at the dinner table.” Sean said.
“In my experience, trust is only built through good communication,” Sean said. “If somebody doesn’t understand what is going on it’s hard for them to be with you during tough times.”
Part of that planning involves seeking guidance from a team of tax, accounting and legal experts, preferably well in advance of finalizing a transaction. “We get a little bit more hands on,” Sean said. “We keep in touch with our clients three or four times a year to talk about various aspects of the business, including succession.”
Tip #3: When To Bring In Outside Counsel
Lisa Holter | Shareholder, Fredrikson & Byron P.A.
“You wouldn’t sell your car without washing it first,” she says. “Is your entity in good standing? Are your corporate records up to date? … Having the housekeeping done gives the impression your business is well run.”
Tip#4: Be Proactive So that Family Members are “C-Level Ready” to Take Over
Peggy DeMuse | Broker, Sunbelt Business Advisors
“The kids are going to be paying you for the next 10 years, [you better] get them to be at the C-level,” he says. “Or, they can own [the business] but they don’t have to show up every day. You can have a management team run the day-to-day operations.”
Lisa Holter says if family members are not working in the business, they can receive distributions if it’s profitable, but they should not be paid. “The decision should be made by the board as a group,” she adds. “That is treating your other employees fairly too.” “You can still pay the kids,” Sean Boland adds. “That’s not an issue. It’s just not called compensation.”
More generally, Tom Siders suggests that business owners remember to try to keep business and family as separate as possible. “Fair isn’t always equal and equal isn’t always fair,” he says. “There will be differences in ways the children are treated. The more you can do to pull those two circles apart and run the business like a business and try to pretend they are not family, the better off you will be.”
Tip #5: Maximizing Value If Selling the Business Outside the Family
Tom Siders | Partner, L. Harris Partners
“We get one shot at this,” she says. “Selling to the first person who comes through the door is almost always not your best bet. It might be but you want to make sure.”
Out-of-family sales bring other issues, such as to provide reasonable incentive for key employees to stay and ensuring that if the exiting owner is a “rainmaker,” that person is phased out of that role before the sale.
“Locking up key employees and important customers through a transition also is essential,” adds Sean Boland. And so is having at least a rough estimate of what the company is worth. “If you don’t have a valuation go get one. It’s a cheap alternative to just picking the first guy,” he adds.
How DS+B Can Help With Growing or Transferring A Family-Owned Business:
There is complexity in any business, but perhaps none more so than in a family owned business. The finances of the business, owners, employees and other shareholders can all be intertwined. Compensation, decision-making and priorities can all be impacted by the structure of the family. However, the rewards can be the highest with a family owned business as well – providing not just an income today but also a legacy and financial security for multiple generations.
DS+B is a professional services firm with 60+ years of proven experience with multi-generation, family owned businesses. As a team of CPAs and business advisors, we deliver an award-winning, integrated client service experience that combines accounting, audit, tax, valuation, information technology and wealth management. We provide a connected, proactive and accessible team to streamline your accounting, tax and business advisory needs – so you can spend more time focused on growing and strengthening your business.
For questions or to get started, contact Sean Boland, Managing Principal.