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The #1 Reason a Family Business Transition Will Fail…or Succeed

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I’m not a licensed pilot, but I sure get a kick out of aviation. Flight, especially the powered kind, just seems to drop metaphors from the sky – perfect for illustrating narratives.  Consider this:  there are two major types of flying machine – fixed wing (airplanes) and rotary wing (helicopters).  Both use an engine to force their flight surfaces through the air, creating lift.  An airplane uses a jet engine or piston engine to propel its wings forward, and a helicopter uses its power plant to rotate its wings for exactly the same effect.  Same resultant lift, but vastly different methods.

Airplanes can be beautiful, and sleek lines are both pleasing to the eye and functional:  less drag means more lift.  Helicopters, though, don’t have to worry as much about sleek lines and aerodynamic shapes.  After all, as the old saying goes, helos don’t actually fly, they just beat the air into submission.  That’s not true, of course, but they do fly differently.  Cut the power to an airplane and a helicopter flying side by side at 3,000 feet and which one do you predict will glide farther?

Some Family Businesses are Airplanes, some are Helicopters

And the same can be said about Family Business Owners.  It’s not empirically robust (yet), but I would argue that the controlling owner’s gender -and his/her spouse’s role – will play a significant part in a transition.  In their groundbreaking book “The $14 Trillion Woman,” Barbara Kay and Anthony DiLeonardi explore the differences between male and female investors – how they set goals and reach critical decisions.  To paraphrase them, men tend to be more goal oriented and women set their sights more on security and freedom.  Similarly, male and female stakeholders view things the same way.  In some multi-generation family business transition scenarios, a patriarch is more likely to focus on enterprise value and multiples to reach a clear monetary threshold, enough to buy that lake house, red Ferrari, or other tangible goal.  The matriarch, of course, wants enough to enable them to live their dreams, but not if it tears the family apart in the process.

Family Business Transitions Succeed or Fail Because of Communication

Remember:  FOB|BOF – the family owned business and business owning family are opposite sides of the same coin; they are inextricably linked and affect each other immensely.  The solid vertical line between them represents a coin, a mirror, and/or a barrier – of language.  Business models and strategies have always been written in the language of the FOB, but if a transition is to succeed they MUST be written in a language understandable by both the FOB and the BOF.  Don’t misunderstand me:  I don’t just mean rephrasing them with different words.  I mean business models and strategy plans envisioned, created and implemented by the entire BOF for its own goals and objectives, using the FOB as a critical resource to achieve them.

A transition shouldn’t be the final chapter in the story of the Family Owned Business, it should be the next chapter in the story of the Family.

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