family business issues

© 2010 Knowledge Bureau, Inc.

Seven Generation Thinking

“Building Family Business Dynasties”

Enzo Calamo, B.Comm., BA, LL.B., CFP, RFP, CLU, CSA, TEP

Lugen Family Office Inc.

© 2010 All Rights Reserved The Knowledge Bureau


Agenda • An overview of “Seven Generation Thinking”

– Dealing with the Challenges facing Business Families in implementing Seven Generation Thinking

• The Ten Key Principles to Building a Sustainable Family Dynasty

• The Importance of The Advisor’s Role in Legacy Planning


Is Seven Generation Thinking a Fairytale?


Identify The Elephant(s) in the

Room………

Dealing with the Challenges of Seven Generation Thinking


Let’s go back Seven Generations

Jesse James

Abraham Lincoln

(Sept. 5, 1847 – April 3, 1882)

(Feb. 12, 1809 – April 15, 1865) Sir John A. Macdonald (11 January1815 – 6 June 1891)


1st

Generation 2nd

Generation 3rd

Generation

The Global Reality: Shirtsleeve to Shirtsleeve in Three Generations

Build Wealth

Maintain Wealth

Squander Wealth


Complexity of the Family Business Life Cycle

Business Family

Personal System

Family System Ownership System

Business System

Childhood

Mid-Life

Late Adulthood

Child/Siblings

Marriage

Family with Children

Empty Nesters

Entrepreneur

Sibling Partnership

Cousin Consortium

Survival Growth

Maturity Regeneration

Environment Industry, Political, Economic, Social,

Technology

John


Issues Within the FAMILY SYSTEM

CONTROL: Senior

generation cannot let go

COMPETENCE: Next generation

not prepared

CONFLICT: Rivalry and conflict

between family members

CLOSED SYSTEMS: In laws excluded

COMPLACENCY: Disinterested

family members

COMMUNICATION: Lack of effective communication


How longevity has changed our World

Source: New York Times, 2001

Sara Knauss, 118

Bob Butz Grandson, 73 Kathy Jacoby

Great-granddaughter, 49

Kitty Sullivan Daughter, 95

Kristina Patton Great-great granddaughter, 27

Bradley Patton Great-great-great grandson, 3 +


1st

Generation 2nd

Generation 3rd

Generation

The Mission of Seven Generation Thinking

Build Wealth

Build Wealth

Build Wealth

4th

Generation


How Is Legacy Preserved? Monuments

Mission Statement / ethical wills

Oral history

Diaries, journals, blogs Personal belongings: photos, memorabilia

Estate/ownership transfer

Personal Impact: business, experiences, financial

Philanthropy

Time spent with others Parenting/mentoring

Video Legacy


Ten Key Principles for Sustaining a Family Dynasty


Principle 1: Stewardship The principle of managing the assets of a

family business in such a way as to preserve or increase their worth for future

generations.


Principle 2: Focus on what you focus on the you value BEFORE value of what you own


Pursuit of personal life, health, liberty,

possessions, dreams, and happiness

Empowering the rights of others to life, health,

liberty, possessions, dreams, and their pursuit

of happiness

Principle 3: "One for all, all for one”


Principle 4: Think about what hat you are wearing before you speak


Principle 5: You must establish a Governance System for the Family Business

1.The family should treat the business as a challenging opportunity, not a haven with a guaranteed paycheck.

2. How will In-Laws be treated? 3. How will ownership be handled between

active and passive children? 4. How will Successors be chosen and

trained?


Principle 6: Family and Business Communication is critical for building and maintaining trust

1. The assets of a family are its individual members

2. Establish forums for communication (i.e. family meetings, family council, Board of Directors, etc.)

3. Establish mission and vision statements (Personal, Business, and Family)

4. Preserve family stories for future generations


Principle 7: Change is Constant – Both Families and Businesses Evolve Over Time

Family of Affinity – each family member supports shared family values and provides "intimacy, love and trust” to each other.

The sale of the Business should always be an option – Risk taken with Passion and Wisdom can build a sustainable business. An “Entitlement Mentality” or a “Have To Attitude” generally leads to business failure.

http://en.wikipedia.org/wiki/Intimacy�

http://en.wikipedia.org/wiki/Love�

http://en.wikipedia.org/wiki/Trust_(social_sciences)�


Principle 8: Business Succession Planning Means the Business Must Operate Without You

Founder Successors

• Have regular discussions about career options for children • Monitor how children handle work and family issues • Give your children a chance to handle big decisions • Announce a target date for your retirement

• Show respect for Parent accomplishments • Be pro-active on learning executive skills • Establish a schedule to discuss with parents mission/vision, priorities, philosophies and decision-making criteria • Manage sibling rivalry


Principle 9: Create strategic vehicles that nourish and empower all Family Members

1. Family Bank – Using family wealth to support new business opportunities

2. Philanthropy – Create consensus for Family causes and develop a formal decision making process

3. Family Office – Consolidate financial and business knowledge for all family members


Principle10: Understand the Importance of the CEO

- Chief Executive Officer - Chief Empathy Officer - Chief Entertainment Officer - Chief Educational Officer - Chief Elder Officer - Chief Exercise Officer - Chief Employment Officer - Chief Ethics Officer

AND MANY

MORE….


As a Wealth Coach you must choose how you will empower a Family’s Wealth?

Vs.


Financial Assets

Personal Possessions

Instructions & Wishes

Values & Life Lessons 77%

65%

34%

10%

Ranking the Four Pillars

What you KNOW

What you HAVE



TRADITIONAL PLANNING Manages what you

HAVE

LEGACY PLANNING Manages what you

KNOW

PERSONAL MATTERS • Values & traditions • Life lessons • Timeless

memories • Accomplishments PRACTICAL MATTERS • Location of key

documents • Household

maintenance • Care of children &

pets • Funeral

arrangements

LEGAL MATTERS • Legal will • Trusts • Powers of

attorney • Asset protection

FINANCIAL MATTERS • Investments • Businesses • Insurances • Taxes



Golden Nugget


Fairytales Can Come True!

• Financial success and a strong business cannot make a strong family; but a strong family can build a sustainable business which brings financial success.


THANK YOU!

For more information, go to

www.lugenfamilyoffice.com

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