The Three Priorities That Quietly Divide Every Family Business
The owner room is a difficult room to talk about. It's difficult because without a strong foundation of character, this room will crumble.
I've seen two common themes from highly functioning legacy families over the past decade:
Family members are equipped, empowered, and educated as shareholders (the family room prepared them for the owner room).
The operations receive appropriate capital support from this ownership room.
If the family room is broken, the owner room will be even more broken.
The family room sets the foundation of trust. (That's why we started there last week.)
Money is an amplifier of character. If the room that builds the character isn't functioning, then the owner room is fraught with challenges that carry much bigger consequences than a dramatic Thanksgiving dinner.
I was at a family business conference last week, and one of the presenters shared a timeless truth that captures the toughest challenge in the owner room.
There is a natural tension between active and inactive owners.
With every passing generation, the inactive ownership group compounds faster than the active ownership group.
Families grow faster than businesses.
Family businesses often lack the liquidity to match the lifestyle of multiple growing families with growing needs.
Three priorities compete in the owner room:
Growth (invest income in the business for the future)
Liquidity (cash today)
Control (remain a family business)
Which side of the table you sit on, active or inactive, can dictate very different priorities.
As stewards active in the business, we must find ways to activate other family members in the family system. (We'll explore that in many entries in the weeks and months ahead.)
We'll return to the owner room soon. For now, I wanted to lay the groundwork of the challenges we face.
Fortunately, the four rooms give us a board room, instrumental in serving the long-term interests of both the business and its owners.
I look forward to continuing our walk through the four rooms next week.
Onward,
Matt