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Economic or Emotional Decisions

Dear Advisor:

Our family business has grown substantially and quite profitably over the years, but our industry is changing rapidly. Occasionally, Dad wonders aloud whether he should sell the business. My older brother and I (we are both mid-level executives in the company) are debating about the future. He wants us to go to Dad and tell him how we are to carry on our family business into the third generation, and how we should be planning finances, strategy and succession to ease the transition. While I'll be happy to play whatever role is appropriate for me in the future, I think we should simply encourage Dad to do what's right for the business including his possible decision to sell. I think he should make a business decision untainted by emotional considerations. What do you think?


We think that your perspective is very interesting and that you need to give it a lot more thought. Here's why.

It is impossible to decide to sell a family business without reference to emotions. Indeed, the belief that economics and emotion can or must be separated is a false dichotomy. Given an economically viable strategy, success depends on competing effectively which in turn requires skill, motivation, discipline and commitment. We certainly recommend a thoughtful, objective, well-researched discussion on the circumstances and conditions required for future success coupled with a careful analysis of the resources required to be successful (that's called strategic planning). We also recommend an objective analysis of the company's potential future leaders, including you and your brother, as to their abilities, strengths and weaknesses (that's called œsuccession planning). Finally, we recommend thorough and sophisticated financial analysis to assure reasonably healthy capitalization, to provide for the elder generation's lifetime security and to cover death tax liabilities.

Since your business has grown and become quite profitable, you clearly have a viable strategy. If you've done the planning recommended above, the keys to future success are likely to center around your passion, your commitment and your will to be successful. Lacking evidence of those œemotional considerations, your father may well decide to sell. He could interpret your lack of expressed desire and commitment as apathy. In your effort not to allow emotions to influence the decision, you well may reveal your emotions and, in effect, make a self-fulfilling prophecy.

We also think you need to take a hard, deep look within yourself to try and understand what emotions you are not revealing. Perhaps you feel trapped in the family business. Perhaps a rivalry is being played out with your brother. Perhaps you are attempting to distance yourself from your father. Perhaps you doubt your own abilities. Perhaps family and career issues are mixed up with ownership issues, and this is your way of sorting things out. You may need some professional help in working through your feelings.

Your family has been building an institution for three generations. It affords opportunities including wealth, careers, identity, family cohesiveness and much more. It also offers potentially frightening challenges related to leadership, risk, and familial relationships. Success requires real work for the head and for the heart.

Your desire to remain passive and quiet about decisions that could have a huge impact on the rest of your life and the lives of your children, is not one that we support, regardless of the outcome of that decision. Indeed, it makes us concerned for you and for your entire family.

 

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