Family Business Succession Planning:We are our own worst enemies

Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Every Business Must Be SoldEither Internally Or Externally

‣ Gifting the business to your children is a recipe for wealth destruction

2 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

How OldAre Old People?

‣ Old is someone 15 years your senior

‣ No matter your age, you still feel young...

‣ And your not ready to ‘stop doing’!

3 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Could We Say The SameFor Succession Planning?

‣ “Succession planning? That is something I will think about when I get older.”

‣ Still lots of time

‣ My kids aren’t ready yet

‣ Going to work until I die

4 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Some Of Us May Be Thinking...

‣ “What would I do with my time if I wasn’t building this company?”

‣ “Will my children do the work the way I do the work?”

5 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

30%

6 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Why Do Only 30% Of Family BusinessSucceed At The Second Generation?

‣ Poor training

‣ Lack of common vision

‣ Parent does not hand over de-facto control

‣ Compensation program

‣ Business is gifted vs. earned

7 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Are We AvoidingThe Difficult Questions?

‣ Taking the time to plan the transition means having the difficult conversations:

‣ Who will lead?

‣ When will it happen?

‣ How to compensate?

‣ What gets transitioned?

‣ Who has defacto control? 8 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Would You GiftThe Stock Portfolio?

‣ Look at the business as a wealth building investment that provides an ROI...

‣ If this was the view, would you gift it?

9 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

You Have A Choice:Voluntary Or Involuntary Transition

‣ Our role is to replace ourself at the point we stop adding value to the organization

‣ Think of yourself as the business’ steward, instead of its founder

10 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Choice!

Transition or Sell

Family Business Succession PlanningIn 9 Successful Steps

11 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

9 Three tools every family deploys

8 Transition over 3 to 7 years

7 Compensate family at market value

6 Determine roles, accountability, responsibility

5 Rebuild structure on paper

4 Craft strategies to overcome obstacles

3 Identify the obstacles

2 Begin with end in mind

1 Separate people from problems

Separate The PeopleFrom The Problem

Step

1

12 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

FamilyOwnership

Management

Emotional Centre•Empathy•Support Wealth Centre

•Stewardship•Fair and Equitable

Wealth Engine•Opportunity•Competition

Source: The SuccessCare Program

Begin WithThe End In Mind

‣ What will the business look like in 7 years?

‣ customers

‣ markets

‣ products

‣ size

‣ structure

‣ people

Step

2

13 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Source: The Success Care Program

IdentifyThe Obstacles

‣ What are the obstacles preventing the business from achieving the vision?

‣ Leadership skills?

‣ Resources (time, people, capital)?

‣ Productivity?

‣ Ownership structure?

‣ Output capacity?

Step

3

14 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Craft The Strategies That WillOvercome The Obstacles

‣ What are the 4 to 6 initiatives required to move things forward?

Step

4

15 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Rebuild The PreferredStructure On Paper

‣ How does both the ownership and management structures need to evolve?

Step

5

16 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Determining Roles,Accountability And Responsibility

‣ Put people in roles that allow them to play to their strengths, while developing future leaders

‣ Give them freedom within a framework

‣ Reward their efforts

Step

6

17 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Mary

Ken

Dad/Mom

Compensate Family MembersAt Market Value For Their Work

Step

7

18 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

‣Give them the opportunity to buy into the company over time using their own earnings

‣ Provide a bonus for delivering at the high end of their target

To Fully Transition A Business,Plan On 3 To 7 Years

Step

8

19 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Management by founder

Management by successor

Management by founder

Management by successor

Management by non-family CEO

Management by founder

Management by successor

Management by founder

Management by successor

Cold Turkey

On again, off again

Slow And Painful

Interim Solution

Progressive

Source: The SuccessCare Program

3 Tools Every FamilyShould Deploy

‣ Owner’s Council

‣ Family Charter

‣ Family Foundation

Step

9

20 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Will They Do The WorkThe Way You Do The Work?

‣No

‣ But make no mistake: they will work as hard.

‣ Just in a different way that plays to their strengths and vision

21 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

‣ Yes, you must give this up too!

‣ Let them lead

What AboutDe-facto Control?

22 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Gifting The Business To Your ChildrenIs A Recipe For Wealth Destruction

‣ Give your adult child a large enough sum of money and ask them where they would invest it.

‣ If they say ‘in the business’, you know an internal transition is possible

‣ If they say ‘no thanks’, sell the business outside

23 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Monetize The Value Created,While Shaping New Realities

24 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Starting fresh never felt so

good!

‣ I believe being a trusted advisor involves listening first.  The more I seek to understand your business and what you are dealing with, the richer the dialogue becomes.  I have a friendly and engaging work style that is balanced between asking questions, challenging, and providing solutions for you to consider.

‣ What I don’t do is make decisions for you.  Our conversations are designed to stretch your thinking, for me to be a sounding board, and most importantly, a catalyst for you and your company’s growth.

Lead With Your Entrepreneurial SpiritWhile Accessing Breakthrough Solutions

Jeff Haltrecht | family business advisor

About the

author!

25 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Treating You With Respect,While Challenging For Better Performance

‣ When applied correctly, values guide behaviour and set the tone for interaction between people.  Here is what you can expect when we work together:

‣ Treating you with respect

‣ Challenging for better performance

‣ Helping you be internally driven

‣ Putting ideas to action

‣ Embracing change as the path to opportunity

‣ Communicating candidly

‣ Delivering results

Bus

ines

s M

odel

ing

Strategic Thinking

Leadership

Developm

ent

MarketingInnovatio

n

ExceptionalExperience

Jeff Haltrecht | family business advisor

About the

author!

26 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

A Safe And Private PlaceTo Have A Proactive Discussion

‣ Helping small to mid size business owners maximize wealth within the company so that when you choose to sell or transition sometime in the future, the business is valued at the highest price possible.

27 Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11

Strategic Business PlanBuild your business with powerful yet simple

strategies that add to company wealth

Business Growth AdvisorWorking one-on-one, we take a solid look at

your strategic plan, leadership style, and management productivity, all with the intent of

helping you maximize value within the company

Succession PlanningEffective solutions for realizing business wealth - so that the day you choose to transition or sell -

the company gets the highest price possible

Products

‣ WEB & BLOG

‣ TWITTER

‣ LINKEDIN

‣ EMAIL

‣ PHONE - 905.601.0311

‣ OFFICE - Oakville, Ontario, Canada

28

Have A Terrific Day!Contact Information

Building Company WealthTM

Cop

yrig

ht Je

ff H

altr

echt

| fa

mily

bus

ines

s ad

viso

r 20

11