Sustaining the Family Business

Rating:
Summary: Scrub-a-Dub cleans up
Review: Articulate and literate. The author frequently includes the opinion of the professionals in the field. This book is written from his experience within a very successful company. So some of the advice won't apply to owner's whose business/estate isn't worth more than [a] million or so.
By 'professionals in the field' I mean that there are a few professors turned consultant/author who have written texts on family business. They all tend to quote each other, and this author does the same. But he has some valuable insights of his own.
If your business is worth many millions, check out his column versus pyramid idea of ownership succession. Or if you're ready to pass your company, of any size, along to the next generation, this discusses the options.

Rating:
Summary: well worth your time
Review: The dreary statistics are familiar to all of us who work with family businesses: family businesses make up 90% of the 15 million operations in the United States. Only one-third make it to the second generation. And only 10% make to the third.

Given such depressing numbers, isn't it only logical that owners can easily be convinced by industry consolidators to turn their ownership into cash?

Marshall Paisner takes strong objection to this view.

Accountants can only consider market value when making pricing decisions. Family business owners need to take market value into account, but they also need to consider family values. In the long run, family value is more important. The goal of a family business is to live a desired lifestyle and give the next generation the opportunity to do the same thing.

And if you don't like Paisner's "soft" view of business, he argues that the return on a successful family business is almost always greater than the after-tax return of an estate produced by the sale of such a business.

Much of what Paisner says has been said elsewhere. This book is worth reading because Paisner is the Chairman of Scrub-A-Dub Auto Wash Centers, Inc., one of the world's largest car-wash chains. Founded in 1965, he has successful transitioned the business to his two sons. And we can personally attest that Scrub-A-Dub is one of the best consumer products marketing companies we have ever seen! And we have seen many.

SUSTAINING THE FAMILY BUSINESS is a "How I Did It" book plus an integration of published research plus an integration with other family businesses around the country.

Topics include: Creating a Family Culture, Managing Family Conflict, Developing Tax Strategies, Developing Estate Strategies, When Selling Makes Sense, Navigating a Successful Sale.

For those of who serve on Boards of family businesses, Paisner speaks positively about the use of true outsiders to serve on his Board of Advisors, how he selected them, and how he compensated them.

He has a section on what actions to take when spouses' perceive that their mates are being unfairly treated. Such perceptions can poison both the business atmosphere and the family atmosphere. Paisner has a cogent prescription for what those steps ought to be.

Rating:
Summary: A thoughtful look at the family business
Review: These days, it seems harder than ever to predict the future of the family business. Killer companies, rollouts and sweet buyout offers have dampened the enthusiasm of many first-generation business owners for passing their businesses on to their sons and daughters.

Indeed, when presented a "too good to be true" offer from a potential buyer, patriarchs and matriarchs are inclined to say "Why not?" They can take the cash, make sure that their retirement years will be comfortable, and have some money left over to pass on to the kids.

A compelling argument, but it's not what family businesses are about, says Marshall Paisner, founder and now chairman of the ScrubaDub Auto Wash Centers, a chain of 10 car washes in metropolitan Boston. Paisner believes that family businesses exist to sustain families financially and spiritually. Yes, they must be innovative, customer-focused and, ultimately, profitable. And yes, sometimes selling out is the best option. But Paisner believes that it's the best option far less often than people think.

Paisner launched ScrubaDub in 1965. Through innovation, a participative management style, fun and a slavish devotion to the customer, the company has grown steadily since then. No doubt much of that growth is due to Paisner's enthusiasm about customer service. He's even managed to make car washes fun, offering coupons and red-carpet service for regular customers. (See the company's website at www.scrubadub.com for information on the Car Care Club, gift ideas and the Scrubadub Difference.)

He sees the family business as a gift, not a burden. Indeed, this is the fundamental thesis of his book. But getting kids to see the business as a privilege instead of a right doesn't happen overnight. It starts at the dinner table, when the kids are young.

"In too many families, parents send signals to their children that running a family business is a stressful and unfulfilling endeavor," says Paisner. "Wishing to spare their children unnecessary worry about problems they can't understand, parents unwittingly turn their children against the business by banishing business talk from the dinner table, closing off opportunities to share both disappointments and triumphs."

Paisner himself prepared his kids for a ScrubaDub future by having them to work in the car wash during summers, then encouraging them to work outside the business after graduation before joining the company. Once the kids were involved in the business, he instituted a participative style of management that allowed all family members to gradually take on responsibilities and learn how to deal with conflict.

He drew up a "family plan" to articulate the family's overall intentions for the business. Owners can use such plans to articulate their conception of the business "as a trust for which each generation acts as a temporary guardian, preserving it to pass on to later generations," he believes.

Paisner firmly believes that most of the reasons people give for selling are based on "inadequate information, poor planning, or what I consider to be an insufficient appreciation for the benefits of keeping a family business in the family."

Still, he does allow that sometimes - though not often - selling the family business is indeed the best option. Perhaps the best reason, he believes, is when the business is about to get knocked off by new technology.

If it comes down to a sale, owners shouldn't make a move without enlisting the aid of a smart investment banker to help them value their business and elicit the best offers possible. Then, once the sale is made, every provision should be made to distribute the money equitably. Distinguishes family business culture from general business culture, because it makes clear that the business exists, essentially, for extrabusiness reasons. It doesn't exist solely to make money and to be successful, like most business; it exists to take care of a family."

Maybe there's more to life than the golf course after all.