Family-Owned Business Planning Done WRONG

We get to see the output from dozens if not hundreds of business advisors each year. Some of the work is pretty darn good, some of it is laughable, and most is, by definition, average.
It’s amazing that today, 40 years after Leon Danco first recognized and wrote about the family business as a system facing unique challenges and demanding unique interventions, most advisor solutions still tend to be narrowly focused and ignore a great many of the needs of either the family or the business.
The following are four mistakes most advisors make when attempting to help their family owned business clients—and how you can avoid these errors.
1. They don’t consider all four dimensions of The Family Business Triangle. For those of you who aren’t familiar with our four dimensional balanced triangle consulting model, this is what it looks like: 

The base of the triangle is the family system, interpersonal relations between family members, and relations between members of the business family team.
While many people think of businesses as machines that crank out products or services, the fact is that they’re populated by people who must communicate, lead, follow, be motivated, and handle victory, defeat, daily challenges, and business management effectively.
Dealing with the “soft” issues of family and interpersonal relations is usually the most delicate and overlooked area of need in a closely held business.
The second side of the triangle is the day-to-day management and operations of the enterprise.
Management and operations consist of the chain of authority, roles and responsibilities, accountability, the administrative functions of the business, delivery of business products and services, marketing, sales, IT, customer service, and all the other functions which make the business go.
The third side of the triangle is the wealth and ownership dimension. This dynamic deals with money, power, and decision-making.
The fourth dimension is balance.
Because the family firm has such strong gravitational pull for the families who populate it, they often find their lives out of balance.
The business demands 80 hour work weeks, and family communication, health, spirituality, and other areas suffer due to the needs of the enterprise.
It’s the rule rather than the exception that at some point in the life span of the company that the business gradually sucks the life out of the family rather than adding to and enhancing the quality of their lives.
Why drone on and on about The Family Business Triangle? It’s because that most advisors ignore it!
They try to provide solutions that deal with, for example, estate planning while not dealing at all with fractious family relations and a business whose sales have plateaued and begun to decline.
Similarly, a family therapist might do a great deal of good in opening up lines of communication; however, unless that work is translated into the management and operations element of the business, a new breakdown is likely to occur; one piece doesn’t necessarily mutually support another unless it is the family’s and advisor’s intent to make it so.
It’s our philosophy that unless all four dimensions of the balanced triangle are addressed simultaneously that solutions are likely to fail over the long-term.
2. They don’t invite spouses into the conversation. Most advisors never bother to invite spouses or significant others into the long-term planning conversations.
Surprisingly, some family leaders also push back against including spouses. They rationalize that: “They don’t work here, so why do we need to include them?” How shortsighted!
Spouses may not have a direct stake in day-to-day operations, but surely they have a stake in the long-term success of the business!
Even more importantly, they have a stake in you or their kids who work there! If you’re a husband, wife, brother, sister, or cousin, you certainly have insight into the other people in the family and business; you have opinions about the current state of affairs; and you have a vested interest in long-term outcomes.
We find that we get terrific feedback from spouses and others, which helps us tailor appropriate solutions.
Also included in the “not invited” group are key nonfamily employees. In any discussion of the long-term planning of your family and business, you’d be nuts if you failed to include some of the very people that you’ve hired to help run your business successfully!
3. They stop as soon as the immediate pain is gone. Family owned business leaders tend to be rugged individuals. They put off going to the doctor as long as possible, and they never, ever ask for directions!
When their backs are against the wall, and they do need to turn to outside advisors for help, they are often impatient to get a solution into place so they can go back to “business as usual.”
In a case where a family has unusually dysfunctional communications, one where they can’t ever seem to see eye to eye on anything at all, they might turn to a family therapist for improvement. They’ll have a series of individual and group meetings and find that, due to the intervention of the professional, things have improved and are somewhat better.
At that point, they’ll politely thank the professional for her help and shut down the improvement process. They’re cured! Problems that have taken a generation or more to manifest themselves have miraculously evaporated over the course of 30 or 45 days!
While this sarcasm might be misplaced, it is a fact that most family owned business leaders see interventions more like emergency room procedures designed to stop the bleeding rather than long-term assignments that might resemble more closely a long-term health, nutrition, exercise, and weight loss program.
4. They mistake “drop-dead planning” for succession planning. There is a huge industry composed of financial planners, CPAs, attorneys, and insurance companies that have promoted estate planning as a “must do” for even the smallest family business—and this is a good thing!
Surely no one should leave their business or personal affairs in disarray if the worst happens.
So why is this a problem? The problem has to do with the fact that estate planning, drop-dead planning in our vernacular, provides the illusion that planning for the long-term future of the business is complete.
The fact is that drop-dead planning, irrespective of the tax savings and amount of paper generated, can be a barrier to doing the real heavy lifting of answering the question “what if you live?”
A 65-year-old business owner who does drop-dead planning will probably work for at least another 10 years and has adult children and/or nonfamily executives who will work another 20 to 40 years!
What succession benefits does drop-dead planning provide for them, outside of the obvious? What business planning has actually been done? How will they increase sales, profits, and the company valuation as a result of the drop-dead plan? How will they attract and hire the next generation of talent they’ll need to take the company to a new level? How will brothers and sisters communicate and make decisions once the senior generation steps away?
None of these vitally important issues are resolved by undertaking drop-dead planning; it is an element of succession planning, but it doesn’t begin to address communications, management, or operations issues that affect the goose that lays golden eggs!
Do the Opposite
I know what you’re thinking: “Well, you spilled a good deal of ink here telling us what planners do wrong; how do we get it right?”
Simply take these four items and do the opposite!
Be sure to consider and take actions to bolster all four elements of The Balanced Triangle, include spouses and key nonfamily employees in your planning discussions, push on with your planning and improvement projects even after the immediate pain is gone, and go beyond the basics of legal and testamentary documents when it comes to succession planning.
If you do these four things, you’ll be light years ahead of your competition.
—Wayne Rivers
Wayne Rivers is the co-founder and President of The Family Business Institute, Inc. He has authored three books on the subject of business families: The Top Nine Reasons Family Businesses Fail—And the Eight Building Blocks for Creating a SUSTAINABLE Closely Held Business, Prescriptions For a Healthy Family Business, and You Don’t Have To Die To Win—Success and Succession For Family Businesses.