This is the second part in a series of articles that address common problems and issues in family-owned businesses. The articles are based on an interview between Al McClymont, CEO of Autologica Dealer Management Systems, and J.C. Aimetta, an expert and coach who specializes in family-owned businesses.
Al McClymont: Several companies I personally know of have suffered huge troubles that were even irreparable sometimes, both for the company itself and for the relationship among the members involved, the emotional relationships: when a family member decides they want to, or that they need to sell their share of the family business.
J.C. Aimetta: Well, in these cases, the first thing one should think about is how to avoid this from actually happening, how to prevent the possibility of this happening.
First of all, we must distinguish between a person who sells because they want to, from a person who sells because they have to, because they have no choice, because they need the money for an urgent personal situation, an illness, a child who has a scholarship abroad, or something like that.
For this type of situation, the family-owned company should have a liquidity fund that is available, under equal conditions, to all partners for personal emergencies. This liquidity fund, generally placed in investments that can be quickly turned into cash, implies an immobilization of funds that the family business usually does not want to have. However it acts as a guarantee, when an emergency situation arises, that will prevent someone from being forced to sell their share.
Another thing to consider is that no one can sell unless there is someone willing to buy.
Therefore, when someone wants to sell their share, it should be stipulated, written and signed, to whom the share must be offered. Because it is not the same to offer it to a brother, to a cousin, to the company itself (the company can reabsorb it), than it is to offer it to a third party.
Because when an angry family member decides to sell to someone who is not a part of the family, they are immediately inviting into the owners circle a person who is not a family member. In other words, the company stops being a family business.
In the next part of this interview, we will discuss how a family-owned business can reconcile the interests of family members who work in the company, with the interests of those members who do not.
About the authors
Al McClymont is founder and CEO of Autologica Dealer Management Systems (www.autologica.net). Established in 1994, Autologica helps automotive, agricultural and construction equipment dealers around the world increase their bottom line through the use of its Windows-based dealer management systems and CRM tools. Autologica has a presence in South Africa, the Middle East, Asia-Pacific, Mexico and South America. His blog can be found at www.thelightisgreen.com.
J.C. Aimetta is a consultant to more than 65 small and medium family-owned businesses, and a negotiator in family conflicts and in the sale of family-owned businesses. He is also a professor on the subject in graduate and post-graduate courses in 3 Argentine universities, and has given conferences in Panama, Guatemala, El Salvador, Costa Rica, Colombia, Ecuador and Venezuela.
