In past articles we have examined the challenges of family dynamics when running and operating a closely held, family-run business. We have also talked about the challenges of a parent deciding when, who, and how to pass the family business on to his or her offspring. History is replete with family-run businesses that exist well into future generations. However, it is also full of stories that clearly describe the failings of these businesses and how difficult it can be to maintain a family-run business beyond the first generation.
As challenging as parent/child relationships can be, we have likewise seen in our practice just how challenging it is for siblings to operate as co-owners. Quite a few of our clients are brother/brother or brother/sister owners. Others have several siblings involved in the ownership structure. Even if the siblings started the business from scratch together, it can often be hard when they finally reach the time to exit to do so in an agreeable, orderly fashion.
Quite often the issues we face in getting two siblings to concur on a business sale were created years earlier in the business growth by barriers, walls, and in some cases seeds of outright distrust that were planted by comments or actions that were difficult for the siblings to overcome.
Because of this, I thought I would share with the readers of our blog some great advice I recently came across on Entrepreneur.com from a pair of sibling co-owners. Authored by Matthew Toren, “contributor, serial entrepreneur, mentor and co-founder of YoungEntrepreneur.com,” the piece offers fantastic advice to any of you who are co-owners of a small business (or even a larger one) with one or more of your siblings.
Based on our years of working with family-run businesses, we agree with all of this advice. Each of these is equally important, but to avoid conflicts down the road as the business grows, we have seen how vital the second one is. The siblings we have seen that work best together throughout the years have been those that clearly outline (in writing if possible) what each person will be responsible for – and once these designations are established – stay out of each other’s hair!
We have rarely seen siblings who have the same skill set. Generally what we have experienced is that one will be more comfortable with financial management and/or operations and the other sales and marketing. Now this demarcation does not always fall cleanly into this segmentation, but more often than not, it does. And when it does, as long as the two (or more) siblings have allowed each other freedom to manage and lead their respective groups, the more success we have seen longer term.
This method does not ensure sibling success in operating a business, but it definitely helps. So if you are part owner in a sibling-run business, clearly outline what each of you will be focusing on based on your individual strengths and interests. Allow each other the space to operate and the freedom to make decisions that are not second-guessed. If input is asked about key decisions (see number four above), then give it but be sure that you trust your sibling(s) to do their jobs.
To the great list that Mr. Toren has provided us, I would add a couple of more based on our experience. First, agree with your siblings that family gatherings are NOT the place to bring up business issues, problems, and decisions. We have found this to be not only counter-productive but it can also allow family members who have no ownership in the business to give their “advice,” much of it unwanted and unneeded. If there are a number of family members with minority ownerships, then key decisions should be made at specific meetings of the “board,” not over Christmas Dinner after a few too many of Aunt Martha’s famous spiked eggnogs.
Secondly, and most importantly, sooth and fix hurt feelings ASAP. Do not let bad karma fester in a business/sibling relationship. This becomes especially true if you are on an exit plan that will require the two (or more) of you to agree to a sale. Far too often our dealmakers see a perfectly good financial transaction go up in smoke because of hurt feelings generated by a word or a deed years earlier. As challenging as it is, ferret out these issues so that when the time approaches for the siblings to agree to the business sale, both are in agreement.
Now in many transactions we work on with sibling ownership, it is not necessary or even needed for both (or more) to exit. In many deals we have closed, the OPTIMAL deal was a partial sale where an equity group cashed out an older brother and the younger brother was retained to operate the new entity as a holding of the equity firm. But even with this structure, legally before a co-owned business is sold, both siblings have to agree. So be sure to address any inter-family squabbles that have been allowed to fester longer before hiring an M&A advisory firm to work for you.
Naturally, any enterprise where family members are involved will have the opportunity to create family friction – chafing that would most often not be present if the company were not family run. These issues go back to Cain and Abel, and although they cannot be avoided, their impact can be minimized.
To learn more about how you and your siblings can prepare your company, and yourselves, to be ready to eventually sell, I invite you to attend a Generational Equity M&A seminar. While there you will not only learn a great deal about the overall M&A process, you will also have the opportunity to speak with our one of our managing directors and seminar leaders, many of whom owned (and in some cases) co-owned a family business.
And we want to give a special thanks to Matthew Toren for writing an insightful piece on how siblings can get along even while running a company. You can read the entire article here: 5 Keys to Successful Sibling Partnerships.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2014 Generational Equity, LLC All Rights Reserved
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 2 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.