Seeking Counsel for Your Family Business Sometimes, family members just aren't the best people to make tough decisions about a family business. A trusted advisor can make those decisions for you.

When sisters Moo Thorpe and Sonja Bohannon's father diedsuddenly in 1992, it was more than a family tragedy. It jeopardizedthe future of their third-generation family ranch and hotelbusiness in New Mexico. "Our dad was like John Wayne,"said Thorpe. "Everything revolved around him."

Her father might have felt like John Wayne, but he was notimmortal. His sudden death and the lack of a written successionplan threw the family into a tailspin. "Mom took over, but shewas resentful," said Bohannon. "Everyone expected her tobe dad. A few years went by, and we noticed she started pullingaway. She didn't call as often and didn't talk to us aboutwhat was happening on the ranch like she used to."

Then, the sisters learned that she'd been talking aboutselling the ranch to a local hotel chain. "We were facing acrisis," said Thorpe. "It was lose the family, lose thelodge-lose everything, or make the best of it and maintain arelationship."

The family retained a family business consultant, who arranged aretreat for the entire family-four children from his twomarriages and their father's widow, Lore Thorpe. At theretreat, they created a chart to rank the concerns and needs of allinvolved, considering both financial and emotional needs. Theresults of the exercise were a surprise to the sisters. Even thoughall the children felt a strong emotional attachment to the ranchwhere they'd grown up, the formal evaluation process revealedthat the best choice for everyone involved was to sell it and moveon. "When we sold it, I felt as if I'd been setfree," said Moo. "I didn't want to be crippled by itanymore, and I didn't want my daughters to be crippled byit."

"It was cathartic," said Bohannon. "It'sstill raw. It was a lesson in letting go."

The challenges faced by the sisters were extreme, but notunique. Over 90 percent of businesses in North America are familybusinesses, according to statistics supplied by the Family FirmInstitute (FFI), based in Boston. Family-owned businesses in theUnited States account for 78 percent of new job creation, 60percent of all employment and over 50 percent of the Gross DomesticProduct, according to FFI, a professional organization thatpromotes an interdisciplinary approach to family businessconsulting.

FFI President Francois de Visscher, a family business consultantand fourth-generation family businessman, said building a familybusiness offers a terrific opportunity to build tax-deferred wealthwithin a family. Parents who are able to pass on a prosperousbusiness to their children also receive a great deal of pride andsatisfaction. He said right now, with the aging baby boomergeneration, the country is facing the largest intergenerationaltransfer of wealth in its history-more than $4.2 trillionstands to be passed on by family businesses in the next 20 years,and more than $10 trillion in the next 40 years.

However, despite the statistics that indicate their dominance inthe economy and the many advantages to family business, only 30percent of family businesses survive into the second generation, 12percent into the third, and just 3 percent last into a fourthgeneration, according to the FFI. Experts say family businessesface additional challenges that non-family businesses do not. Amongthese are the problems of succession and inheritance as well as themixing of personal and business matters. In many family businesses,there are additional conflicts between those family members whowork in the family business and those who do not.

Jim Hutcheson, a consultant and former family business owner,shared the following example. He worked with a business that wasowned equally by the parents, their son and their daughter. Theycame to him for help because the son had a terrible heroin andcocaine habit and had embezzled almost $250,000 from the business."They came to me because they wondered what to do," saidHutcheson in an interview.

Clearly, if this embezzling drug addict had been a businesspartner and not a brother and son, there would have been noquestion about the course of action. But family members in businesswith each other have trouble making decisions that put the businessahead of family concerns, even when the solution might seem obviousto an outsider. It's for this reason that outside counsel canbe so crucial for the survival of family firms, especially at timesof transition, be they from business growth, succession or anyother major changes.

"In the seventies, no one wanted to talk about familybusiness," said David Pistrui, who teaches at the AlfredUniversity Center on Family Business. "It was seen asshameful. Now, the entrepreneurial spirit is seen as positive, andthere's a close association between entrepreneurship and familybusiness."

Choosing anAdvisor
Here are some tips on choosing an outside family businessadvisor:

• Make sure the person is not affiliated with any family businessmembers.
• Make efforts to keep the relationship professional, beginningwith the hiring process.
• Do not allow the mediator to be drawn into familyrelationships; their involvement must be kept to the business levelalone.
• Choose a person that all parties can trust.
• Set clear expectations at the beginning of what you want thecounselor to accomplish.
• Make sure everyone involved is open to change.
• Let the consultant act as a confidant to business. They mustunderstand the family relationship dynamics, but not get involvedin them.
• A consultant should serve as a window on the outside world, amirror to the activities of the business and a catalyst forchange.

Jane Applegate is a syndicated columnist and the authorof 201 Great Ideas for Your Small Business. Fora free copy of her "Business Owner's Check Up," sendyour name and address to Check Up, P.O. Box 768, Pelham NY 10803 ore-mail it to info@sbtv.com.