How to Advise Your Family’s Business

DiC - Become your family's business advisor

Whether your family owns a retail business, a factory or other operating business, a restaurant, or a professional service firm, you can help your parents and other family members make wise decisions that protect the family’s assets and interests.  And you don’t have to be a lawyer or an accountant to do it. From time to time, though, you may need outside experts to help navigate in times of distress or difficulty.

Robin Coady Smith, Co-founder of Privatus CI3O, observes from experience that family business owners — and their families — are often unprepared for the many diverse decisions and events  that confront them.  How they respond to both planned and unplanned transitions can chart the course for a business family’s ongoing financial security and emotional well-being over time.

An experienced transition expert to wealthy families, Robin knows that business owners are often dependent upon technical experts from many fields — lawyers, accountants, business valuation experts, and others.  They may speak in terms that family members don’t understand, about decisions and recommendations that have huge implications. And if these advisors don’t work together, or offer conflicting advice, the family can feel pressured and fear a loss of control, at times with devastating consequences.  This is where a transition expert like Robin can restore calm, control and help to create alignment between family and advisors.

So what can you do to help protect your family and the business?  Robin has several suggestions:

1.  Learn about risk.

Not your capacity for risk, but the ways risk in your business affects the bottom line. Examples of risk might include outdated technology,  a lack of up-to-date processes and procedures, and an overdependence on too few clients.  Equally significant are intangible or softer risks, which are more difficult to recognize because they don’t appear on financial statements.  These are the risks related to governance, such as what should happen if the CEO or president dies and there is no succession plan. Another item of softer risk is knowledge, such as the possibility that the business lacks essential skills or industry insights. Could your industry or the economy change dramatically, making the business less competitive?  Would it make sense to sell the business?  How might these risks affect the value of your business and its potential sales price?  What are the options for selling or holding on to the business?  In other words, understand the risks in your business from various vantage points.

2. Cultivate relationships with experts both in your community and beyond.

Your mother or father or others in charge undoubtedly rely on a number of advisors.  While these advisors may be excellent, their skills and how they work may better suit your parents’ wants and interests. You may want to build connections with your own potential experts and advisors, as the challenges and decisions that you will face some day may be very different from those faced by your parents.

3. Bring advisors together.

Suggest that your parents (and/or others directly responsible for the business) bring their trusted advisors together for group meetings.  Offer to act as the facilitator.  Pay attention to how the advisors relate to each other.  Are there too many advisors who share a  similar focus, such as investments or taxes?  Do they seem more accountable to their firm than to your family?  Robin emphasizes that a good advisor will put your family’s expectations and interests ahead of their own.  Just as important, they will collaborate with other experts in achieving the family’s expectations for results.

4. Keep asking questions.

If you don’t understand an advisor’s recommendations, ask him/her to talk in plain language. Get past the jargon. Make sure you understand the answers, and make sure your parents do too.

Your efforts to bring the advisors together with your family will help to assure that they  work well together, with an understanding and concern for your family’s needs.  And as a result, you may end up being one of the best advisors your family has ever had.


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