Not far from where I was born, Art Van Elslander started a family business that grew to a $725 million retail chain of furniture stores called Art Van within 50 years of its founding.
With the advent of Wayfair and Amazon, Art needed to pivot and build a succession plan. He was in his late 80s and the time was now. Art had 10 heirs yet he decided to sell to Private Equity.
Art died the year after the company was sold and he was quoted saying that he felt confident with the transition and he believed employees were in the best of hands. Yet, what unfolded was a train wreck of issues. Many of the employees were filing lawsuits and the company was bankrupt.
Though there IS a case for Private Equity, in many cases folks choose this option when they do not see the way through an amicable transition within the family. However, consider this… in 2019 a paper was published from California Polytechnic that examined 500 companies taken private from 1980 to 2006. It found that about 20% filed for bankruptcy which is 10x the rate of those that stayed public. Yet, according to Business Week, Private Equity has had 40% higher returns then the S&P 500 over the last 20 years. They can afford the losses.
If you are in the helm or a successor of a Family Business I invite you to take some time to answer the following questions:
- Why did your business start?
- How would you define the legacy of your business?
- To what degree do you want to do what is best for your employees and customers?
- What holds you back from keeping the business in the family? If there was a way to do so amicably would you want to?
Often our team gets pulled into situations from attorneys, accountants, and financial advisors when families are stuck.
The common threads are:
- The person at the helm is near ready to move on (inside 10 years).
- The family values their relationships over the business.
- The owner(s) care deeply about their employees (especially the ones who helped them get to where they are).
- The owner(s) care about their customers and the impact the organization makes.
- Leaving a legacy is something they value.
I find owners resonate with this list, but often run the other way as they cannot see the way through. It is for this reason we have helped the companies we have. If this message resonates with you I would happy to hop on a call to share some perspective on what we have witnessed in the last 9 years that we have been helping families navigate transition and ending up better for it.
Feel free to reach out to firstname.lastname@example.org