Letting Go of the Original Business
Having succeeded his father as president of the family's traditional business, a brother was struggling to return the company to profitability. Over the years, thanks to opportunities generated by the original business, the family embarked on new ventures. Some worked out. Others did less well and were exited. Today the family's interests span four primary businesses, with the three newer operations far out performing the first. Another brother serves as holding company CEO.
The two brothers were discussing the situation recently. The ROI (return on investment) on our original business really stinks, observed the CEO brother. We have to do something.
Well, the ROI has always been poor, said the other. You know we've always used the business to identify other opportunities and kept score in ways designed to minimize taxes.
Yeah, I know all that. But I've had the accountants in to allocate costs properly. The books are straight now and we can really tell what's going on. Bottom line, your operation isn't cutting it. In fact, its a major drain on our assets.
Well, I've been telling Dad that we need to do things differently, but you know Dad.
The CEO brother looked thoughtful. Look, I'm not blaming our problems on you. But we were trained by Dad. I think we need new blood in our old business, and if that doesn't do the trick, I think we should sell it.
But a family member has always run that business. And wecan't just sell it, we owe our people more than that. You dance with who brung you to the party!
Look at our other three businesses. We have non-family presidents in all three and they're doing great. The ROI for each one is above industry average, said the CEO.
Yeah, but the original firm is our family's business. The others I look at kind of like investments.
Well, the business you're running is an investment too, said the CEO brother. And when you look at it that way, it's not a very good one. We need to evaluate all of our operations as investments and act accordingly.
In many families, the dialog above could have lead to disastrous conflict. In this family, however, the two brothers and a third sibling in the business had worked for years on developing themselves as a sibling owner/management team. They all worked hard at balancing their owner, executive and family roles. While this story continues to unfold, the brothers' insights, skills and sensitivities are helping them to work through some very complicated and risky issues in a relatively objective and professional way. They, and the business, draw strength from their familial relationships without family considerations becoming a detriment to the business.
That's an ideal all family businesses should strive toward.
Articles purchased or downloaded from Family Business Consulting Group® are designed to provide general information and are not intended to provide specific legal, accounting, tax or other professional advice. Since your individual situation may present special circumstances or complexities not addressed in this article and laws and regulations may change, you should consult your professional advisors for assistance with respect to any matter discussed in this article. Family Business Consulting Group®, its editors and contributors shall have no responsibility for any actions or inactions made in reliance upon information contained in this article. Articles are based on experience on real family businesses. However, names and other identifying characteristics may be changed to protect privacy.
The copyright on this article is held by Family Business Consulting Group®. All rights reserved.
Articles may be available for reprint with permission. To learn more about using articles for your publication, contact firstname.lastname@example.org.