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Market Analysis for Small Family- Owned Businesses in the US

by | Dec 10, 2024 | Consulting, family, Family Wealth

Yesterday a client said, “We’re too small.  We can’t afford consulting.  We make less than $1M in annual revenue.  We build decks and patios.  This business pays the bills.  I guess it’s my retirement plan…”

Sound familiar? 

Yikes.  It sounds short-sighted and dangerous to me! 

People provide solutions… and customers buy solutions.  That’s the bottom line.

This business leader does not ONLY build decks and patios…  Not really.   That would be short-sighted.   He creates “outdoor living experiences for loved ones.”  Something remarkable.

How much would you invest in a backyard party for your child’s birthday?  Or your family reunion?  Or your weekend football game party?  Or that special bottle of wine or bourbon?

If you invested $30,000 into an outdoor living redesign, wouldn’t you expect decades of priceless experiences with your loved ones?  That solution is priceless.  

Case Study: Joe

A second business leader said, “I don’t think I have anything valuable, so when I retire, I’ll just let it shut down.”

I asked, “What’s your annual revenue and earnings?”

He said, “Our revenue is about $1m/ year and I make about $250,000 year.   Everything else goes back into capital expenses and employee compensation.  We’ve had a good life. I’ve raised my family.”

I asked, “What if you assumed 4x earnings, and someone offered you $1,000,000 to buy your business next week?  Would you retire?”

FACT:  Most business leaders don’t know their value and succession options.

Market Analysis Figure 1:

Check out these details… do they look familiar to you?

Segment  Annual Revenue  Avg. No. of Employees  Avg. No. of Owners  FTEs  Strengths  Weaknesses  Key Problems  
Small Family-OwnedLess than $1M10-502-35-25Strong community ties, family unityLimited resources, dependency on few customersLack of growth strategy, succession planning

In every corner of the world, in every business sector, small businesses define the success of every economy.   They are the social fabric of communities.   They define success.  They create over 65% of jobs and GDP in the US, and a higher percentage in Asia.

Most of the time, business leaders quietly pass on their business to family members or capable leaders.  Sometimes there is conflict because of bad communication.  Those succession planning discussions require expert advising from consultants.  

“Do-It-Yourself” consulting or “Consulting From a Book” always leads to failure.  Don’t waste your time or money.

I hire experts to build outdoor living experiences.  Or to do any plumbing, electrical, legal, and financial work.  Don’t you hire similar experts?

Market Analysis Figure 2:

How much would you expect to invest in a consulting solution? 

Consulting Needs  Consulting Fee Range (Phase 1)  Consulting Fee Range (Phase 2+)  Representative Business Types  % of U.S. Economy, approx. #  Familiar Family-Owned Businesses  
Business planning, succession and leadership coaching$5,000 – $15,000$10,000 – $25,000 annuallyLocal restaurants, niche retail, craft breweries~10%, 3.1MZabar’s (NYC), King’s Hawaiian, Goorin Bros.

There’s no need for confusion about pricing.  That approach only leads to distrust.

•  Consulting Needs are problems that require external solutions, such as conflict resolution, strategic planning, or leadership coaching.

• Consulting Fee Range (Phase 1: Initial Discovery/Assessment) includes the initial consulting phase, such as discovery, assessments, and strategic recommendations.

• Consulting Fee Range (Phase 2+: Annual Consulting Phases) covers ongoing consulting needs in subsequent phases, including implementation of solutions, leadership coaching, and strategic execution over a year or more.

Back to the first example of the business leader named Joe, who doesn’t know the actual value of his business.  Joe has three options:

  1.  No investment in consulting.  When Joe retires the business dies.
  2. Small investment in consulting, $15,000- 40,000 over 12 months.  When Joe retires the succession plan may enable the business to continue.
  3. Larger investment in consulting, $75,000 – 200,000 over 5 years.  When Joe retires the succession plan may provide over $1,000,000 in real value to the owners or their benefactors.  The community retains jobs.  The business legacy may continue for generations.

Sound familiar?

The solution for most family-owned business leaders is NOT venture capital or private equity investors.   They will extract value and disappear within 3-5 years.  That would be short-sighted and dangerous. 

The solution is to invest in consulting solutions, such as “family capital for loved ones.”

Succession Advisory Teams

The only way to win a football game is expertise on the offensive team, the defensive team, and the special teams.  Each team measures success differently to “put points on the board” or “hold them to three downs” or “run it back.”

In the same way, a Succession Advisory Team brings multi-disciplinary experts together to achieve a win.

Lawyers provide risk mitigation and contractual agreements.  Accountants provide business valuation and options.  Wealth advisors provide investment options.  Business psychologists (like me) facilitate the process. 

We are the quarterbacks.

Your next steps are simple. 

Use these numbers.

Build your Succession Advisory Team today.

Contact me at http://contact us

Play football.

Schedule a short 1:1 free consultation with Doug here.

What is the most important strength of Family Business leaders?

by | Jan 30, 2023 | Business, Coaching, Consulting, Family Wealth, Leadership, Personal Development, strengths, Success

There are many opinions about the top strengths of family business leaders.

One of my recent projects answers that question.

We (Kent Rhodes, Ed.D) and I recently developed and validated a 360 assessment process for next generation family business leaders. See www.AssessNextGen.com for details. We determined the top 50 items.

Our recent research found that the number 1, top strength, or Career Catalyst for family business leaders is Item 13: “Keeps confidences about family business wealth.”

Hmmm. On a scales of 1-10 how well does your family business keep confidences about family wealth? Here are some quick thoughts about how to apply this finding to your family enterprise or family business consulting.

For more details contact Doug Gray, Ph.D. at Gray@theFBCG.com or Kent Rhodes (Ed.D.) at Rhodes@theFBCG.com

Here is the transcript for your reference and sharing:

Video posted on Monday 1/16/23.

Link: https://www.linkedin.com/feed/update/urn:li:activity:7020809894287015936/

Title:  What is the most important strength for Family Business leaders?

Description on YouTube post:  A quick research update from www.AssessNextGen.com.
We can now answer that ancient question, “What is the most important strength of Family Business leaders?”  Here are some tips for your family enterprise or consulting.

Transcript of video:

Sometimes people wonder, “what are the top competencies that family business leaders need?”  And I’m happy to report some early results from the Assess Next Gen Family Business Leadership 360 assessment. This data is from 163 responses in the last few months.  Here is the top score, in other words, the Career Catalyst, the behavior that is number one. I’ll give it to you and then I’m going to ask you to reflect on it.

The top score, the thing that our raters said others ought to do, is item number 13: “Keep confidences about the family business wealth.”  To repeat,  the most important strength of Family Business leaders is to “keep confidences about family business wealth.”  What does that mean for you and your family or your enterprise?

I recently asked that question of a friend of mine, John Broons, who’s in Australia, who is pretty brilliant.  And he said, “family wealth needs to be part of the conversation.  It’s too often not discussed.” 

I agree.  We need to prepare for risks, like a transition or a succession or continuity or another line of business.  And too often family members don’t have any idea of what’s next.  There’s the core business. Perhaps there might be other lines of business, but family wealth conversations should definitely stay within the family.

Many of my clients have a charter or clause which states, “This is what we will say, and to whom.”   They may have a conversation with the wealth advisor and estate attorney, and they may not have that conversation with somebody like me, a business consultant.  The family members are the only ones who have access to that information. This is to protect them from journalists or politicians or inappropriate people seeking to learn something about that wealth. And often this confidentiality clause is written in an agreement. So we’re really talking about the two first words here…

Keep confidences.  The most important strength of Family Business leaders is to keep confidences.

How do we keep confidences?  I think we need to reinforce some useful guidelines.  My clients require  trust guidelines. Let me give you a quick example. One of my clients has eight G4 children on this side and four children on this other side. Potential conflicts, right?  So they made an agreement in writing, and verbally reinforced it in every one of their meetings, about what could be shared with Doug as the family business consultant working with that G4 generation. My focus is on leadership development. Part of my job is to reinforce for them what’s confidential and what they need to keep confidential.

It’s a bit like driving a car when you’re driving down an unfamiliar road.  You’ve got the white lines on the right side, the yellow lines on the left side.  Like a good driver, we need to keep confidences. We don’t want to go to the edge of those lines.  We don’t want to go off the center of the road. We certainly don’t want to go in the dirt or the gravel on the side.

So, my invitation is to keep confidences about family business wealth.  Keep that conversation sacred. There you go. Tip of the moment.

For more details on the Assess Next Gen Leadership 360 process, see www.AssessNextGen.com

Or schedule me at contact us