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All right, let’s do it. So, again, hello everyone, thanks for joining us today. My name’s Michael Black, I’m a partner at Richter.

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On behalf of our entire firm, uh, we’d like to welcome you to the first of a series of webinars on a very hot topic today, and sort of in the market right now, succession planning. Today’s session is going to be focused on succession planning for the family business. We do, though, and we’ll repeat this at the end, have more webinars coming up in June, as well as after the summer in September, October, November, and we’ll talk about some of those topics in a bit.

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We’re so glad that you can all join us for what we’re hoping will be an insightful conversation for anyone.

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So, as most of you probably know, we’re currently living through a historic time where there’s going to be a massive amount of generational wealth transferred in the next 5, 10, 20 years.

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And a significant portion of this is going to come from privately held family businesses. And our view as a firm is that succession is not a single event.

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It’s actually a process that requires thoughtful and proactive planning to ensure that the successful transition is not just a plan, but the people involved who will carry it forward as everyone’s bought into this.

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So to dive into this topic, I’m joined by my colleague, Bill McClain, who leads our Business Family Transition Practice.

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And we’ll be doing this webinar is a conversation style, so… and try to keep it free-flowing for everybody, so if you do have questions throughout, please feel free to submit them to the Q&A box at any time, and we’ll also have a Q&A at the end of the session, and try to get to as many questions as we can.

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So with that, and without further delay, uh, let’s get started.

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So I think, Bill, to start this, it’s important to first frame up our perspective of succession planning. And while there’s lots of people that will focus on different discrete elements, whether it’s tax, accounting, getting the business ready to sell, you know, all of that is important.

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But we’re trying to take an approach that focuses on the succession event and the timeline for all the stakeholders involved.

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So with that, why don’t you share your initial framing for what succession planning really means?

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Sure. Thanks, Mike. And, you know, to echo Mike’s welcome, a warm welcome to everybody in the webinar. In reviewing the registrations, I see a great many clients that have had the good fortune of working with.

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Um, leading up to now, and many that I have not yet, but I want to just first openly acknowledge one aspect of this.

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Something as wide and as broad as succession, and what that can mean, can be very different to individuals, to families, to operating companies. So, I want to openly acknowledge that as we move through this webinar, there may be moments in time where you’ll say, been there, done that, or no, that’s not us.

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And 100% acknowledge that every unique situation has nuances around it that might be different. What we’re trying to do is capture the broadest sort of cross-section of reference to this.

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And hopefully offer you some insights that might support where you are in your journey related to that, or who you may be helping in that journey. So, you know, with that, to Mike’s question, when you say, what really is succession?

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At its broadest, it’s an end-to-end process of significant transition. And I appreciate that that’s a very vague reference, but it covers a host of many things.

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For some families or private business owners. Oh, and on that note.

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I’m going to likely make more references as we move through, so it’s not to frustrate all of you, and I’ll say the family.

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But I’m also referring, in most instances, to it could be private partners as well, not necessarily unrelated private partners, and not necessarily families. So, you know, within that end-to-end process, we really are referring to a host of intersect points that occur within succession planning and affecting the transition. When I say that, what I mean

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Is you’ve got the family itself as a unit that live together, love together, all of those things.

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You’ve got operating company interests, and you have shareholder, owner, and wealth interests within there as well. And that whole end-to-end process of transition planning focuses in all of those aspects to ensure that a plan is fulsome, but that it also recognizes that there are different intersect points.

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And so, you know, when you talk about the conflicting sort of sentiments that this can represent for business and family owners, you know, can you give some examples of what could be some of those conflicts at that intersect that you just described there?

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Yeah, and before we dig, you know, too deep into, you know, various scenarios, really, and, you know, many of you who would be on this webinar, you’re living it. You’re inside this right now. In some instances.

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It’s a very thoughtful process to say, are we keeping this business? Are we selling this business? In other instances, it’s if we’re transferring this business within our family or our private partnership.

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Who are we identifying as the successors? In other instances, it’s… there will be family members who are not a non-active contributor, some call it passive.

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Owners or shareholders, but non-active contributors to the business, and how do we acknowledge and recognize that these individuals have a right to share their perspective and their voice, if you will, but might not necessarily be The decision makers, and then the complete opposite end of the spectrum, if there’s been a disposition event, and the family are celebrating the success of having elected to sell a business, you have all of the conflicting dynamics around what does it mean to be significant wealth holders, and what decisions do you need to make to do that. So you can imagine

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Between simply being a member of a family, being active in a business, or being a owner and a shareholder.

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All of the different conflicting points that can crisscross through all of that.

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Highly, highly.

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So what you’re saying, it’s complex. It’s very complex. So, if we break that out, because you’ve talked about a few different scenarios that we could do, so let’s sort of keep with one scenario that I’m actually quite confident most on the call is probably contemplating or thinking through, or maybe they’ve already started or gone through similar things.

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Around keep the business. So if the family wants to keep the business, you know, what are some of the scenarios and the thought process that goes with that? Because then we’ll go to the other side, but let’s start with Keith Business.

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Perfect, and I… and you know, I’ll just… I want to preface something that I neglected to call out before, and that’s… That is, you have major intersections of financial considerations.

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Yes.

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Intellectual or objective. Decisions that you’re thinking through, and then you throw the word family in, and it’s an absolute given that there are emotional.

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Considerations that are happening there, okay? I don’t know of any family that doesn’t have emotional pinpoints.

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That actually happen within them, so you’re considering all of these things, and as exciting.

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As all of that is. It’s also a time of uncertainty.

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So, you know, to your point, you know, and I just quickly tell you, you know, there was a family that I worked with many years ago, four siblings.

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That inherited the business from parents who had both passed, and one, there was no succession plan, but two, there was zero clarity across the siblings as to what did they want to do with the business.

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And, you know, coming into the opportunity to work with them. You can imagine the uncertainty and the fear That was actually sitting there, because they had this significantly successful business, but they had absolutely no alignment in terms of did they want to continue forward? Did one of them want to exit, and the other stay together

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It was just a huge time of uncertainty for them, and my last point before jumping into this is, you know, not long ago.

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10, 15 years ago, it was assumed that succession should just be managed within the context of the business. And we know for a fact now that to just simply say, yeah, we’ll figure it out ourselves, and we don’t really need a plan. We know there are countless stories that have been in the media.

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Where it’s been a disaster from that standpoint. Whether you’re in the media or you’re not. So, I call all this out because for anyone who’s on this webinar or experiencing pain right now, we get it. We understand everything that is involved in that.

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If I shift over with you, Mike, to say, let’s start with the whole idea of keeping the business, to keep… to keep it simple.

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Would say there’s two main sub-scenarios around keep the business. The first one is, is the business passing through the generations?

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Is it moving from one generation to the next? In other words, is it staying in the family?

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From that standpoint. Is the business moving from, and could be a part of this, is the business moving from family management and leadership.

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And moving over to third-party or non-family management leadership. Huge considerations around that.

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Much of what we’re going to call out They apply in either of those scenarios, whether it’s an intergenerational transfer or a transfer to third-party management, but there’s huge things that have to be contemplated as we move through this. Things like

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Is the business going to be gifted within the family, or is it actually going to be sold within the family?

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And we have equal scenarios happening out in the marketplace right now, where it’s a legacy gift, if you will, to say that it will transition through.

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Or in other scenarios where the families say, it’s going to be a sale process from within the family. And when you look at that.

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There are significant transfer considerations that have to be contemplated. Do you have a handle on what the current value of the business is? Or do you need to undertake that process in order to have an intelligent informed discussion about it. Do you understand the tax implications of the transition of that ownership of business to the benefit and or detriment of the parties that are involved in this? So there’s a lot of technical

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Concerns around it. Do you have a strong business strategy plan that will support the transition of the business? And for those who are wondering, what does that mean? Well, just Case in point, a simple thing. Will the emergent generation have a different view to carrying the business forward versus how historically the founding or the current generation have? And Mike, you know this, because this is your area?

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That you’re working, but… and, you know, all of these things, do you have the wherewithal within your family and within your organization to navigate it, or do you need some kind of mix of support?

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To be able to do that. So, you look at all of that.

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And underneath all of it is also How are we going to decide what the decision-making process is?

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Is it, you know, are we… is it a free-for-all to pass it over and say, everybody’s going to collectively participate in decision making?

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Which is aka anarchy for a lot of people, or do you need to define what that controlled decision-making process is going to be. So, I’ll just take a stop there and see, Mike, if you want to, like, check in with me on anything.

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Yeah, well, I think that, you know, in terms of what you’re talking about there, Bill, you know.

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One thing that I would highlight as I was listening to you speak is that most entrepreneurs are very successful. You know, our client base is very successful, and they know how to build a business, they’ve scaled the business, it’s probably very profitable in most cases. And what we’re talking about sounds very distinct and different, because in some ways it is very distinct and different. When you talk about governance control, what’s the mechanism to pass on to the next generation?

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But what struck me was when you’re talking about, do we have the right plan in place, right? Do we have a shared vision of where we want to go? Is there a different vision to go? You mentioned strategic planning, you know, as you know, that’s my bread and butter, that’s what I love to do, but I think that they’re really interconnected, because if you don’t have the plan for where the business is going to go, you know, normally when we’re working with an executive team, we’re trying to get everyone on the same page for, here’s our vision and mission for the business.

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Exactly.

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But now we’ve expanded that, where that still holds true, but the family needs to be bought into that as well, as it aligns to where they want to go with their succession event there. And if there’s differences, it’s better to surface it now than to wait until you’re actually at the table trying to hammer out a shareholders agreement, and then realize you have all of these differing opinions at the same time.

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Yeah, and I, you know, I’ll put a dimension around this. So there, there was… a family that I worked with loved… loved this family. I worked with them for many, many years, and the mother passed unexpectedly.

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And left the entire enterprise, both the wealth and the business.

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To the four siblings, but there really was zero clarity around what the decision-making control was going to be in the business, so they hadn’t really Um, it was not expected to have happened the way it did, so they hadn’t aligned what the go-forward was going to be on it, and what I’m speaking to specifically is

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There are considerations also to non-active or non-participating family members, and we often call it in our world to say, who gets to have a share of voice?

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And who has the share of vote. And it’s difficult, because some families will avoid this, because they fear that that is going to create an upheaval, or it’s going to create conflict, but it is so critical, to your point, Mike, to have contemplated this, and bravely worked through what makes the most sense, because it really will leave off of the family while they’re grieving, or while they’re struggling with the incapacity of an older parent, it leaves them at loggerheads with each other to say, how are we going to structure this? So, to your point about the planning, a well-defined

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And a commonly understood transition plan, and note when I say it doesn’t mean that everybody agrees.

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It does not mean that every family member says, yeah, I bought into it, and I’m lining up behind Sue.

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Or behind Jimmy, right? But if everybody commonly understands what is intended to be done, at least there are expectations of what will come to pass when something occurs. And that often helps navigate families through in such a way that they don’t ultimately end up imploding on one another.

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Sometimes they do, and it’s heartbreaking, but if you can create the clarity, at least you’re reducing the possibility of that kind of conflict.

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And just to put, sort of, at least my final point on this, is that, you know.

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Exactly.

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While you’re dealing with everything that you just described, your business still needs to continue running, and we are living through, you know, for some people, um, I know there’s younger people on the call here, that if you’ve been in your career or industry for the past, let’s say, 7 years.

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You’ve lived through tumultuous times. Despite what you’re talking about. So first it was COVID, now we’re dealing with, you know, geopolitical uncertainty and tariffs and everything, and so you’re compounding this complexity with something that’s emotionally sensitive, it’s hard to discuss and digest.

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And so, you know, there’s a proactive theme that’s starting to emerge to say, get ahead of all of this. Just as much as your business need a plan, your family needs a plan to actually manage all of this. So again, to your point, you may not agree, but at least you have the rules of play so that you don’t have this on the side while your business could be going through what we all are going through right now in the world.

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Exactly. And I think it leads to one, you know, critically important facet of if we’re keeping the business, right? Whether third-party leadership or the leadership of the business is transferring over in the family, and that’s… Business and family governance considerations. Some people don’t like the word governance because it sounds like control.

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Right? And often, in very successful entrepreneurial businesses, mom and or dad did everything the way they needed to do it, and they didn’t require a significant amount of governance.

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They didn’t require significant shareholder agreements, and all of these practices, but when you transition down.

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Into siblings as shared owners, or cousins as shared owners, or that private group is getting bigger and bigger. The need for these considerations grows exponentially. And, you know, to give you a couple of examples, because I’m working with many clients right now who are navigating through this, but establishing new shareholder agreements or informal agreements as well, to say, you know, in order for us to stay aligned to the success of the business.

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But also try to keep us intact as a family. We need to move through a process of saying.

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What do we need to commonly agree on? More importantly, when we don’t agree, how do we move through a process that we all collectively understand and buy into that in the instance of disagreement, that we can navigate this?

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So that we don’t start pointing fingers, and if you’re my brother, Mike, I don’t start pointing fingers and going, he’s a control freak.

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He’s just trying to browbeat me into making all of these decisions. You’ve got a process in place that can allow navigating through these difficult challenges, and as I said, some of it is constituted in shareholder agreements Others, it’s just commonly understood and agreed to. Call them family policies, or whatever you would be comfortable calling them, but you’ve defined it, and then most importantly, you have ensured

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That all of the family members explicitly understand it, and have an opportunity to still share what their thoughts are around it.

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Even if it’s meant to not satisfy everybody across the board.

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I just want to acknowledge we’ve gotten… there’s one question there we’ll take offline, um, this is very target-specific, but it’s less a question and a comment that actually aligns, Bill, with exactly what you’re saying, where it says, you know, this individual has experienced mediation with a third neutral party with family members, and their lawyer consultants helps create that efficient transition plan, right? So mediation can help with those conflicts and also prevent them You know, and so the question at the end there is, like, what’s your experience with this, Bill? Because I know you deal with this

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But yeah.

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All the time, and sort of that… that world.

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Yeah, so that’s awesome, thank you, whoever, for calling out that you’ve successfully moved through that type of approach. The world of facilitation could run the entire gamut, and many of you on this call, I’m sure, have close relationships in the legal community or other trusted advisors who are your go-tos.

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The… any… Organization or individual that represents an experience base of being able to facilitate well the discussions and understand and appreciate the individual perspectives that can come to the table. That is a strong ally, or a strong asset.

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It can come in the form of non-mediation facilitation. This… my area, I’m not a licensed mediator, but I have years and years of facilitation approach in working with families and their businesses based on my own background. So you can have non-binding facilitation.

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You can go into a mediation environment, but for those who aren’t familiar with that, it’s attempting to utilize an organized professional experience approach That does not feel like you’re lawyering up, and you’re going to battle with one another. You then have in the legal community.

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Brilliant attorneys who take a fantastic approach at offering that type of support.

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Or, you actually have people working in coordination with one another. So I have the very good fortune of often working with members of the legal community who have close working relationships with their families.

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But don’t quite feel that that’s their skill set to be able to do that, or they’re representing one family member, and they feel it could be a conflict of interest to try to do this across the board. So, the whole point with this is there’s a community of people, if you feel that you cannot accomplish it within your family independently, there are people out there who can help you move through that process and get you to the other end, where everyone feels far more clear than they ever did before.

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And one thing that I’ve noticed, you know, in my own conversations with some of our families there is that, you know, entrepreneurs are very attached to their business, they’re proud of them, all rightfully so, and what we’ve heard many times is, you know, I’m not ready to step back yet, right? Not ready. And I think what we’ve tried to do, and you know, agree, disagree, that is why I love Bill, we can debate, but I think he’ll agree with me here, is that This is not a step back, right? This is stepping up to make sure that you’re preparing for the future, that you’re doing things properly, um, so people that aren’t ready to let go of their business, even if that is, as we’re still talking about, inside of the business to either professional management.

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Or to the next generation of the family, you’re still intimately involved with all of this. So it’s not like you’re letting go of the reins. You might change into different governance roles, to use that term again.

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Or your family might just have a different dynamic, where instead of, you know, the matriarch or patriarch at the helm, now it’s the second or the next generation that’s stepping up to drive the business to whatever comes next there.

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Yeah, and you know, on that… on that point, and I… I feel this deeply for many families.

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And I understand the prospectus, but think about this. Mom and or dad.

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Put their entire lives into building a business for decades. And I’m sure there’s many on the webinar here who would say, like, the business was intricately woven into our family life, right? It had a seat at the table at a lot of dinners, hopefully not all of them, but it might have had a seat at the dinner.

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To eventually say to… I’ll just say dad, to say to Dad, your time is done. It’s time for you to be finished, and, you know, Pat, I’m Prince Charles, please pass it over to me and let me move forward, right?

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How apropos right now.

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Yeah, but the… but the issue with that is that that is so deeply woven into the psychological, emotional, and intellectual DNA of dad or mom.

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That to just simply say, yeah, we’re gonna do a one-year plan, and it’s all going to be done, and here you go, I’m finished.

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Whereas there are ways, to your point, Mike, to transition an individual to becoming a strong contributing steward of the business, while not necessarily being involved in the day-to-day. And for anyone who’s shaking their head out there right now that I can’t see saying, you haven’t lived my life because I’ve worked with many clients where data’s still rolling into the business a couple days a week.

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And is, you know, is attached to it, there are ways to navigate through that, and to continue to advance the cause for the family. I’m not in any way, shape, or form saying it’s not easy, it’s difficult. I respect that it’s difficult, but to your point.

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To allow for an individual to still have relevance. To still be able to make contribution, but to open the gateway for the family to move forward in building, you know, the next iteration of its enterprise.

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There’s ways to manage that, and… and, you know, I would also say to you.

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If you approach this in a way, think about the way all of you thoughtfully build and execute your business plans, or you entrust others to actually do that.

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While building a thoughtful plan from a transition standpoint, and executing it, to your point, Mike.

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Allows for everybody who’s participating to feel that they’re relevant, that it’s not a door is just being closed in my face because I’m in my mid-70s, and I’m feeling like I just want to be… I’m being pushed aside. That… take the same level of thought and planning into the transition.

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As you actually applied into the business all of the time, and treated as such, and everybody will feel much more satisfied at being a part of it.

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Wholeheartedly agree. So to wrap up scenario one, which is, you know, keeping in the business.

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How best, you know, can you equip the emergent family ownership for success? So we’ve talked about a lot of things.

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In this back and forth, but if you had to sum it up, you know, to equip that next generation, or the next ownership.

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What would you say?

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So, I mean, this is just… it’s so broad, but to kind of ring-fence it and put some things around this, again, I’m just going to quickly say.

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The founding generation often were so busy. Building and surviving, and determining how to thrive, that they wouldn’t necessarily think a lot about some of the things that I’m going to refer to. The emerging generations.

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Who are saying, I’ve got the best of everything that I got from my parents, from my grandparents, but as we all know, the world is just getting more and more complex.

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Emergent generations will say, would I benefit from having, say, for example, more of a board structure?

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So, would I benefit from having advisors, whether it’s a fiduciary board or a less formal advisory board, but do I have competency gaps?

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To my business that I want to bring individuals to the table to help shore that up.

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Another one for the emerging generation, do I perhaps myself need some supportive coaching to come into my own from a leadership and an executive management perspective, right, within the organization. So again, it’s just… I want to keep saying, you’re not alone out there. Where you might need support is to determine where your biggest gaps are.

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For that type of thing. There’s also, you know, the third-party world out there, and sometimes you might think, oh, they’re all swarming all over me, but… and I respect that, but understand where you might most need that third-party support to give you a perfect example, the world of taxation is more complicated than it’s ever been.

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Our good friends, the tax accountants, I mean, they’re literally exhausting themselves trying to stay on top of everything, but that’s a hugely complex world that you may not have, um, the competency in-house. Another big one, education.

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And I know some go, don’t tell me to go, you know, back and do courses and that type of thing, but there’s all kinds of education out there.

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With notable organizations that, for those who are continuing on in the family enterprise world, whether it’s here in Canada, in the US, or beyond, there are educational and association institutions that will hyper-focus on certain areas, that will help you feel more confident, because you’re hearing the stories of other people.

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And, you know, and finally, I just want to make a comment about this.

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There is a way to respect the legacy of what the founding generation, or the current generation, established within the organization habits and Approaches.

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And embracing change. I’ve worked with one organization right now. They have done such a phenomenal job of respecting the legacy that’s been created over almost a century.

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And at the same time, pushing forward to say, what do we need in terms of new intellectual capital coming into the organization. And even though they’re struggling and they’re pushing through it, they’re doing a phenomenal job with it right now.

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So, with that, Bill, let’s keep moving. So, let’s go to Scenario 2. We talked about keep it in the family, keep it professional, whether it’s active or passive. Now.

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When we’re selling the business. So let’s say there either isn’t another generation, maybe the next gen doesn’t want anything to do with it, they want to monetize and do something else. You know, what needs to be top of mind when you’re considering to sell the business? And I’ll just remind our audience, we’ll hit at some of the corporate or business elements of this, but on June 25th, we’ll be actually talking about getting the business itself ready to sell. This is really focused on the family and the stakeholders around about, but we’ll definitely hit on some of the other things, too. But with that, Bill, what’s top of mind when the family wants to sell?

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Just a minor, small question, right? Like… Yeah.

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Sure, and I, you know, again, it’s like, woo! It’s this, there’s a lot, right? But let… Let’s distill it down to 10 minutes. But, you know, you know this well, Mike, because we’ve worked on these things with clients, but, you know, first and foremost.

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Do you actually have clarity on who you will likely sell your business to?

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Because often, well-intentioned founders and entrepreneurs will move along and move along, and say, I’ve achieved a certain value, you know, continuing value in my business. I want to sell my business, right? And some… might not be inclined to say, do I need to take the time to say, how do I want to position this? You know, for… are you selling to a competitor in the existing set right now, right? Or are you… is it a buyer who wants to expand into your space?

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We’re seeing the bleed over by sectors of so many businesses now saying, we’re going to emerge into something we otherwise might never.

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Have contemplated before, right? Are you buying to an interest group internationally that are looking to get a footprint from a geography standpoint in your current marketplace, right?

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Yeah.

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Is it… is it, um, you know, a private equity investor who, again, wants to broaden their portfolio into various spaces and see a prime opportunity to come into an existing operation that they can help support an efficiency build on, and build an even more successful proposition? There are emergent structured groups.

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So, management bios. Some of you have probably experienced… or you’re experiencing it now, where your managers or your executives or your leaders are saying, we might have an interest in acquiring a business that we have all been a part of for years or decades.

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And then there’s employee groups as well. We’re seeing this happen a lot, too, with employee groups that say, we want to take a minority and or a majority stake.

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In buying the business as well. I call out just a small handful of things back to your question, Mike, because knowing First and foremost, who you ideally think you want to target sale to will help you distill your plan to say, how do I prepare myself

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To be best suited for that.

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And I would add to that, Bill, before you keep going, because we actually have a question in there around thoughts on private equity taking a position in the company. And, you know, it’s an interesting question that, again, Brett and I on June 25th will talk a lot more about that.

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But I think, to your point and the relevance for today is, at the family or the entrepreneurial level, the answer to that question partially depends on what you’re going to do next. So the succession plan isn’t just around, how do I manage this transfer in the moment, but it’s also dependent on what do you want to do. So if your value of the business, and this is where some things start to tie together, if the value of the business is tied up as in you as a family, or you as an entrepreneur, and you want to monetize and walk away with that money.

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That’s fine, there’s nothing wrong with that, but if you’re having a private equity group come in, chances are there’s going to be some sort of tie-up for 2, 3, or longer years, where you need to stay with the business, because that’s where the value is really ingrained. And that’s where getting the business ready at the strategic plan level starts to kick in, because if you want to walk away, you need to start now to extract that value from yourself as an individual in institutionalize it in the business.

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Whereas, if you want to sell to a strategic, maybe your individual value is less important because they want a customer book, the channel that you have, the IP or products.

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Yeah.

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And so, depending on who you want to sell to, they’re going to have different demands, and so when we as a firm, you know, come together and Bill is telling us, you know, the family wants to accomplish this, and I go to Brett Alon or Joe, who work on our corporate finance side, they’re going to say, well, what are your goals at the end of this? And then we can start looking at, well, who are the potential buyers lists, because there will be implications for what you have to do as an individual, and what you have to do as a family. And so I think that understanding that, if you want to sell, is, you know, I agree wholeheartedly, next to timeline, that is sort of the next biggest thing that’s there, because

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Yeah.

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To the timeline component, what you can do in one year is very different than what you can do in five years, and then to actually line up what these expectations or demands are of your potential buyers.

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That either takes a lot of time or a little time to execute, but again.

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Not to hammer home the point, but that’s where the plan comes in, is to answer those questions and then work towards them on whatever timeframe you have.

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Yeah, and then for anyone out there, you know, after what we’ve just talked through, it was going, well, I don’t… I don’t really know who I may want to sell to. That’s cool! You’re probably with the majority a lot of the time that would say, I’m not entirely sure.

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Are… the important point to this is that the front end of considering this, the more clarity that you have on where you believe your potential buyer or buyer group is going to be, to Mike’s point, will let you tailor how to become sale ready.

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And that, I think, would be just the next thing I would jump on to say… because a lot of, you know.

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I’ll just give you an example. I worked with an amazing family, but they were like, we’re ready, it’s been two generations, the third have zero interest whatsoever. We don’t want to do third-party management, it’s right, it’s time for us to have a disposition.

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But they literally… the father in this particular instance was just going around having informal conversations with people about, hey, are you interested in buying my company?

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That… that was terrifying, to be honest, because his perceived value of what his company was worth was one-third of what it actually was worth.

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So that, that in itself, well, and if anyone’s going, how can that be? Well, it’s actually quite common to undervalue your own business, so that required some support from a sale readiness standpoint to go through and say, how do you optimize the sale opportunity? So, do you understand the value proposition that your business currently holds? Have you got a barometer read

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That is relatively reliable, to say plus or minus what bandwidth am I in of achieved value. Of course, marketplace economics have an impact on that, depending on what’s happening in the world, but, you know, have you gone through that process?

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Do you know where your plate… you’re in your marketplace, what you’re positioning in that marketplace is? Are you viewed as being a relatively mature sleepier with Due Respect company? Are you viewed as being a maverick that’s forging new territory in your sector, right? Are you creating an entirely new sector with what you’re doing, right? So, understanding all of that.

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Will help you optimize what your approach should be to position you on the sell side as best as possible. And there are, you know, Mike mentioned it earlier, there are so many aspects to this that can be discussed in the future webinars, but you want to move through that to say.

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Where do I think my buying market is, and have I optimized my business to make it sale-ready to go through the process?

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And sometimes I’ll jump in and say, you know, with my own anecdote, it can almost lead to scenario one, where you keep it in the business. So we actually had last year an outreach by the second generation, and the father was doing exactly what you just described, going out, soliciting bids, you know, it was him and his brother that wanted to do it, very ad hoc approach.

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And actually, the call that came in was a panicked call, I would say, to say, you know, I actually don’t want to sell the business, I want to take over the business, and they’d never had that dialogue. So this is like an ongoing discussion now, you know, we check in because just by them making the call to us, us going, you know what, have you ever put forward that you want to buy the business, or was it an unstated understanding, which happens to be the case in that point, and now the, you know, the parent and the child have a very different conversation going on, where they’re starting to say, maybe we sell, maybe I step up and keep it in the family, but there’s still a monetization event.

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But it was just interesting that the father started doing exactly what you’re chatting about, Bill, and now it’s turned into more of a transition internally with potentially an external party coming in to help support. Completely different scenario versus the panic call of, how do I put a bid together and bid to my father, which is a very interesting dynamic as well.

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Yeah, well, I say often, the path to business transition and succession it can be, like, Christopher Columbus. It can navigate through waters, and you’re not 100% sure where it’s going to end. That’s why the more you can proactively anticipate.

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The better that you feel you’re prepared to move through those zigzags that are occurring as you’re transitioning through that.

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And now I think, you know, for those that know Richter, know that we have a unique position, right? We call ourselves a business family office because we act at this intersection of complexity, between working with the business and working with the family. So there’s a lot of families and entrepreneurs that come to us with this, I want to sell the business, whether they’ve been a client for 20 years, or whether they found us through whatever channel, or through a referral, you know, they want to sell the business.

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Part of what we bring to the table and what we like to discuss, because it’s often not discussed, because people don’t have the platform that we have, is really, you know, once you’ve started a sale process, and I won’t even say complete, because I’ll say start the sale process.

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You know, there’s often new wealth that is either going to be generated or has been generated. And so, Bill, what does the family and all the stakeholders in that dynamic need to do as part of their succession or transition plan? Because a lot of people focus on up to the point of sale and probably deal close.

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But there is a whole world that comes after that, that the family also needs to be able to manage, because it’s completely different from building the business, from operating the business, and now you’re into something new that a lot of people don’t really talk about.

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Oh, yeah. Yeah, and you know, I think… It’s so important to acknowledge, so the whole stage of building an amazing enterprise, and anyone on this webinar who has killed themselves to, you know, like, to get to that level, and to do it. And then you have the sale of men, and you had a lot of people from the outside looking in that say.

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Lucky them, they’re doing the happy dance over their millions of dollars, or hundreds of millions of dollars, and life is just tickety-boo for them.

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The pressure internalized that comes From that disposition event, to your point, Mike, and hits the family to say.

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What do we do now, right? How… we have done this for years, decades.

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What do we do now coming? And just, you know, to touch on a couple of things, there are such huge considerations that are happening at that point in time. You have the emotional side of having sold a business, you know, many times you’re leaving, so to speak, employees, and saying, thank you so much, and it’s transitioning over to ownership, et cetera, and all of those nuances.

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Then you have the other side that says, we’re now a family of even more considerable wealth.

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Than we were before. And really, the questions start needing to be asked to say, what do we want to be with that?

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What is it that we want to represent within that wealth? And beyond the, you know, the heyday of this having happened, just, you know.

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What do you want the money to serve at this point in time? And there are big questions around, say, for example.

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Are we going to be a family who seed entrepreneurially other businesses?

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There’s so many that have an interest in doing that, either within the space or even in a broader, expanded space.

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Even within the family, too, right? Like, the next gen’s business.

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Correct. Exactly. Do we… do we… you know, that’s entrepreneurial. Do we want to move into more of the private equity venture capital environment, either within our structured family office.

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Or within other participating bodies that we then contribute to. There’s often big considerations about what do we want our philanthropic footprint to be. I just came back from an event last weekend that was entirely an amazing event, but it was entirely focused on shared philanthropic philosophy. Going forward from that standpoint. There is also the considerations to say, how do we want to support and manifest the wealth?

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Through our family. What is it… how do we want to define what our approach is going to be? And, you know, it reminds me of a family I met a few years ago.

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Beautiful family, but 6 siblings, incredibly influenced by mother and father in terms of their values and what they stand for, and 6 adult siblings going through this, but mom and dad are gone.

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At this point in time, and the wealth transition, which was enormous.

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Comes their way, and the biggest struggle that they had, it wasn’t about their shared family values, the biggest struggle they had was now you have separate nuclear families who also wanted to be able to represent their unique perspective And the modified shared values that they each held with their children. And they were coming into conflict with each other over various aspects of shared assets to say.

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How do we approach this? Well, for that family, they need to actually take the time to go through the process to say.

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Here’s where we’re going to be best together. Here’s where we’re going to acknowledge it’s okay for us to be a part, and we’re going to define a plan, but we’re not going to lose the continuity or the harmony that connects us as a family. We’re also going to accept

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That my view of what I think you should do, Mike, with you and your family, is not necessarily your view.

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Right? And again, they went through a planning process with the support of the right wealth advisory and support team. To your point, we’ve got really strong resources in that area within RFO Capital But they were able to work through this, and the daunting feeling of the wealth coming at them was diminished because they were sharing in the development of a co-design plan that respected both

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Both sides of the table.

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Yeah.

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But what I’m hearing is there’s no one-size-fits-all answer. It’s okay to agree and to agree to disagree as you go through all of this, and you know, there’s so many conversations. I had multiple last week alone, where people are… have watched other families break up at these moments, right? And at different points in time, and they’re saying, you know what, it’s not… we’re not gonna do this, how do we get ahead of this now? Which, to me is very healthy to do.

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Absolutely.

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I think it’s what we encourage as a firm and part of our philosophy, and so I think that that’s what I want to emphasize to those listening, is that This isn’t one plan that everyone needs to agree, and I don’t think that can be emphasized enough. It’s sort of whatever the right plan for you. Bill and I don’t agree all the time, but we still love working together.

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Most days.

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Most days, okay. So then, as we get to the end here, and then there’s a few questions, and please come in with more, um, as we go there. Both, you know, as people are tackling this entire succession planning, transition consideration, right? If we had to wrap it up.

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One of the most important things to focus on, and I’m sure you’re going to pull from all parts of the conversation that we’ve had.

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Sure, and I… and, you know, to anybody, I apologize if these points feel like, oh my gosh, he’s lecturing me, that that’s not the intention. I just feel… I feel very passionately from having seen the success of families who do this well, so that’s all I’m sharing with everybody right now. So, first and foremost.

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Please don’t avoid having conversations in advance of decisions being made. The most heartbreaking thing for me, in all the good fortune of working with so many families.

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Is when something significantly emotional has happened, an incapacity, a death.

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Unexpected or anticipated, and there’s grief, and there’s sentiments that are coming up out of that.

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And then the family are saying, we don’t have any plans, we have to figure out the plan. Please, if you can avoid that.

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They anticipate proactively ahead of time, even though families tend to want to avoid these discussions sometimes, it is so much better for everybody if you do that at the front end as opposed to when a crisis has happened.

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Talk to others who’ve navigated through it. I, you know, I learned many years ago in my journey of working with families of wealth.

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How isolated many families feel. And you would think you participate in various institutions and organizations together, but many families often feel they don’t have many people to talk to. Seek out others, and talk to them, whether it’s third parties that you’re working with.

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Or even in your own networked world. Talk to those who are going through it, or who have gone through it. Ask them to share stories that they’re willing to share, because it will help guide you through considering all the things that you need to.

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The next one, encourage everybody as appropriate in the family. To have a share of a voice. And often this does require more of a facilitated approach.

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Because I mentioned this before, encouraging someone to share their sentiments and their thoughts does not necessarily mean that that individual holds a right to making a decision.

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Within a particular family enterprise, but respecting an individual in an environment that, and yes, it might need to be controlled, but to be able to share their thoughts, allows an individual to feel that they were minimally hurt.

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And that they could share what their sentiments were around that. And sadly, in a lot of families, that does not happen. So, that’s another one. Um, don’t be scared to put structure.

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And planning around this. There are many entrepreneurs are not lovers of being over-structured, or over-engineered, so yes, it should… it’s got to be respected, it’s got to be balanced, but put You’re about to undertake, you know, the biggest transition that could be occurring within your family, short of losing family members. And, you know, Mike, you mentioned before, we’re in the biggest succession transition phase in the history of the world.

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In our country, right? So don’t be scared to put some planning and effort around this to help move yourself along.

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One really important one, um… Acknowledge the fact that you have deeply personal sentiments about this. I have not met one entrepreneur who, you know, if a successful enterprise where it was one of the most important things, and it was in their heart and soul, right? Obligations to employees and tons of families and all those things, but acknowledge you’ve got personal sentiments, and find a way to channel those, to let them out, to share them.

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We’re all human. Can’t be robots, right? So…

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And, um, and let them become a part of the overall, uh, planning effort. And then… Yeah, very last thing I’d say, you’re not alone. I mean, you’re… there’s… I don’t know how many hundreds are on here, but you’re not… you are not alone.

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Going through this. If you feel you don’t have the in-house capacity within your family to be able to do this.

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Try to determine where you can find a trusted quarterback to help you work through this. A individual or individuals who have background and understanding on it, who will, in an objective way, work with you and your family to be able to move through it. I’m not talking about boiling the ocean. Some families say, I need some light structure.

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In order to do it, other families say, please be a part of this and move along. But don’t hold back on choosing to get the support. You built an amazing enterprise off of guts and determination. There is nothing wrong with identifying a need in an area where there are experts out there to be able to help you with it. At the end of the day, this might be the thing that helps you move along, so whether it’s in your own family capacity.

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Or with third parties, you know, feel the pain, and do it anyway, because it will help you advance forward in anticipating how best to manage this.

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Couldn’t have said it better myself. Thank you. So with that, we’re going to move into the Q&A. There’s some questions that have come in, and I’ll try to group some of them together here. Um, so the first one is, uh…

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How to know when you’re ready to start planning for succession.

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So, Bill, do you want to take this one? I have a very firm answer, but let’s hear yours.

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Yeah.

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10 years ago. I’m tongue-in-cheek. The, um… I would say this, and yes, every scenario is different, depending upon where you’re at.

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Age, stage, business maturity, you know, to everything Mike and I have been talking about with all of you. Are you keeping it? Are you selling it? All of those things, yes, it has a bearing. What I would say in general.

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Is there still a high degree of avoidance with a lot of entrepreneurs and family business owners? It’s almost like yeah, we should be talking about this, but we can… we can wait 5 more years.

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Or we can wait 10 more years. And as we all know, in the world, life is uncertain, things happen to individuals, to families, or in the economy, so I would just strongly urge to say, if Something is popping into the mines.

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Of families and family business owners. If ideas are coming into your mind about the future and succession and transition considerations. That is probably a cue that you might give more focused consideration on should these conversations be happening. And to anyone who says, this just seems like a lot to take on.

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You do… I know we’ve covered… try to do A to Z through here. It’s not about all of that. Sometimes it’s just commencing discussions to say.

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What is our shared view, if we have a shared view of what the future should look like? It can be done at 20,000 feet, just to grease the wheels.

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Right.

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A little bit. It doesn’t have to be the full-blown plan with everything that Mike and I are talking about here, but if it’s in people’s minds.

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There is likely value in determining how best you might start the dialogue.

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So there’s a question that’s actually related to exactly what you’re talking about.

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How do you deal with resistant family members? So, if you want to engage in this conversation, but your family’s going, absolutely not, and that could be anybody I’m going to assume, then how would you best advise to approach that situation?

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So I… it would probably come as no surprise to people, given that we… my area operates in business-family transitions.

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That very often, we will come into contact with a strongly resistant… sometimes the primary or the dominant decision maker in the family, because he or she has spent their entire lifetime doing this a certain way, and often don’t appreciate the fact that, why do… why do I need to talk to somebody else about this, right? So, for anyone who may be nodding their head out there right now, I fully respect and feel your pain.

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For being able to move, um, through that. In that instance.

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What we have found often is a willingness to come forward and simply share stories.

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Not coming to say. Hi, Joe, or Hi, Sue, you know, you really need to get on with this. You’re 75 years old, and you know, the clock’s ticking and start your plan.

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Often, we will come in on a pay-it-forward, because here, I and us at Richter, we feel very strongly about this, about bringing the very best of our understanding to the table.

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But sometimes it is simply sharing stories of the good, the bad, and the ugly.

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That have truthfully happened out there, to simply enlighten resistant individuals to say, these are outcomes that can occur.

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It doesn’t mean, ultimately, that it’s gonna eliminate the resistance, but sometimes in a non-invasive way, if you simply share that with others.

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It will start a dialogue to say, well, we have some of that happening in our family or in our company, and it sometimes just wedges the door open a little more for that consideration.

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Other times, it is, you know, there are many spouses where one spouse will come forward and say, I’m really worried about this, but my lug-headed husband is, you know, ignoring all of the signs, and we need to do this. So, you can move around the family.

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My strong preference is to lead with sharing. And see if that can open up capacity to drop the resistance.

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Thank you. And so the last few questions were actually all related to each other, so we have one around, um, comment on the control factors, given the new federal intergenerational transfer rules.

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Allowing for the enhanced tax treatment on transfer, another one around how does tax planning factor into all of this? So, Bill, I know you used to be part of a tax practice. I am not a tax practitioner, so we’ll have other people follow up, but if you want to take a kick at your response to that?

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Sure, it’s terrifying. I was part of a tax practice where I was the leader in it, but I’m not an accountant.

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Yeah, exactly.

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So, a lot of people are going to start dropping off the webinar right now, but the… and just for everybody’s understanding, the… often what will happen in the consideration of succession planning, is people will revert very fast to what we call the technical.

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So it’ll move very quickly to going, so what’s the tax handling of a transaction going to look like, and all of those things, like, I’m tax-averse, and you have a right to be, and I want to avoid all of this.

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There’s absolutely nothing wrong with that. What I want to… I want to simply say one thing and then another.

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To dive right quickly into all of that. If you don’t have the clarity of the things that we’re talking about under the whole umbrella.

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What is it that I want to accomplish in this succession plan? What is the likely avenue I’m going to go down? Who will be my target?

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Buying group, or am I gifting within my family, etc. If you don’t think through some of those nuances.

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All the technical planning in the world could just keep reverting back and forth and zigzagging around, so I’m a big proponent of saying.

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Get your clarity, determine how you want to quarterback this forward, and then, of course, I fully acknowledge the detailed technical support that is required, legal perspective, tax perspective, trusts, all of those things that intersect in our world.

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And I think whoever asked this question, I actually just think, you know, you loaded up a bit of a preamble for Mike, the way the sessions have been designed here, it’s to move in that direction, right?

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Absolutely. So, you know, as we look forward, as I mentioned, in June, we’re going to be talking about the… what sort of, in more deep, uh, depth, sorry, what we talked about getting the business ready to sell, and so Brett Merrill will join us, and we’ll chat about, you know, if you want to go through a sell-side process, what does that look like?

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We’ll take a break in the summer, just because we know people have vacation plans, but then when we come into the fall, some of the topics that we’re going to cover will be the human capital element of this, so how do you upscale your talent, your management team, fill out gaps, whatever it is. We’ll look at different compensation structures, because some of this could tie into some of that employee ownership, or just how do you incentivize people to drive performance, as well as to tie it to the questions at hand. The, you know, audit and tax considerations after you have your plan, you know, what do you actually do to implement that in the technical, as we say?

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So those are definitely all topics that we’re going to cover, and we’ll… I know for a fact we’ll hit at, you know, some of the technical stuff in our sell-side readiness webinar that’s coming up, but more to come, but for the people that asked questions, we’ll make sure that we follow up with you individually, um, with some of the answers and connect you with the right individual.

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So, with that, I don’t see any more questions in the chat, so first and foremost, thanks, Bill, for joining me today. Always love hearing you chat.

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More importantly, thank you to everybody else for tuning in today. We look forward to continuing this discussion. It’s important, there’s a lot of noise out there, and there’s a lot of considerations that hopefully you can walk away with from today’s conversation. And so, you know, we would encourage you that if you have a connection with Richter, please reach out to them if you want any follow-up discussions. As Bill said, we’re always here to bring the… or put our best foot forward, so we’re happy to get into a room and chat about some of this on a sort of a no-commitment basis, and if you’re new to Richter, welcome. You know, we’re always happy to meet new people, new clients, and look forward to meeting with you and, you know, discussing your specific situation.

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Because as you can probably appreciate, there’s a bunch of flavors to this in terms of how you can approach it, and there is no one size, there’s no right answer, there’s just what’s the right answer for you.

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So once again, on behalf of myself, on behalf of my colleague Bill, and our entire Richter family, thank you so much for being with us today. Have a great rest of your day, and look forward to seeing everybody at the next one.

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Take care