How many decisions have you made in the last year that have had a ripple effect through your business and/or family?
When making these decisions, without a philosophy for ownership, you are left to guess, rely on gut feelings or hope that decisions you make are aligned with the wishes of the ownership.
When you have a philosophy that guides major ownership decisions it can help minimize risk and maximize opportunity for your family and your business.
Answer these four important questions to define your ownership philosophy:
● What does it take to be an owner of the business? Do you have to be a certain age? Do you have to work in the business? Do you have to lead the business? Do you have to buy stock or is it gifted? Can step-children or adopted children be owners? Can spouses be owners?
● Do you have requirements for family members to work in the business?Do they need a certain level of training or education? Do they need to work elsewhere before they work in the family business? Do they need to get a promotion at another business before joining the family business?
● What is your ownership approach to growth and profit? Are you aggressive about growth or more moderate? Do you have certain expectations for profit? Do you expect distributions for owners? Do you expect profits to be invested back into the business?
● How do we make decisions as an ownership group? Do we have a board of advisers or directors? Do we have a family council? Do we vote on decisions? Does the majority stockholder make all decisions?
The answers to these four questions will guide your business decisions.
How do you determine your ownership philosophy? Ideally you set aside a full day with all owners of the business. Spend some time on your own answering what you think the answers to these four questions should be. Then answer the questions one by one by discussing and debating them until you come to agreement. Share your decision with the leaders of your family business, next generation family members and future owners.
One note, if you first determine your ownership values and the legacy you want to build, the answers to these questions will become more clear.
Schedule a full day to meet with all owners of your family business. Discuss and debate your ownership philosophy until you have answered all four questions.
Share the answers to these questions with family members, leaders of your business and your advisers so you can create appropriate documents.
Reach out to me, Sara Stern, at firstname.lastname@example.org to help you get started.