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Family Business Matters       11/03 10:46

   Business Partnerships

   A shared vision, good communication and the freedom to choose to be business 
partners helps set the stage for success in your family partnership.

By Lance Woodbury
DTN Farm Business Adviser

   Usually, when we think of business partners, we think of people who work 
together because their skills and personalities complement each other so value 
is enhanced. For example, one partner is good with people, and another partner 
is more mechanically inclined. Or, one partner enjoys finances and marketing, 
and another partner loves being on the combine or planter.

   But, agricultural families who want to keep land in the family often show 
little regard for whether siblings of the next generation have complementary 
skills or whether they are temperamentally fit to work together. People come to 
be business partners because of their family ties, their parent's wishes or an 
estate-planning strategy, not because they chose to go into business together. 
The assumption is that since we are family, we will automatically work out all 
the business issues together.

   Yet, when siblings work together, they quickly realize being related does 
not translate into a good business partnership. Expectations about 
communication and decision-making change. Profitability, distributions and debt 
become topics of conversation.

   "Who's in charge" does not revolve around who is oldest but, instead, 
becomes a financial and legal determination, and potentially a liability. It's 
no wonder that family relationships begin to fray under the pressure of 
business and financial decisions. 

   How can you avoid the problems you've seen neighbors and friends go through 
after inheriting assets together?

   DEVELOP A VISION

   When people who were not in business together suddenly find themselves with 
common ownership, they often bring different ideas of the future. Taking time 
to fully explore each partner's goals, ideas and concerns offers a chance to go 
beyond financial ownership and develop psychological ownership. Each owner 
expressing his or her hopes for the future allows you to tailor your management 
of the asset. If done well, a common vision can provide enthusiasm and guidance 
for a generation or more. 

   CHANGE COMMUNICATION PATTERNS

   Families often come together for special occasions. Holidays, vacations, 
weddings and funerals are where people reconnect and rekindle their sense of 
family. But, when shared property or financial assets become a reason for 
gathering, the traditional family roles, communication patterns and decisions 
change. Family events become tense when the discussion turns to managing money.

   For example, an older sibling might take a leadership role in a family 
event, but in a business discussion, the sibling with the most expertise, or 
the family member who lives in closer proximity to the assets, may be the best 
person to lead the conversation. 

   DEVELOP EXIT PLANS

   At some point, someone will want out of the business partnership. Sharing 
DNA does not always make for good business partnerships, and getting out of 
business together may help you become a better family. At whatever point an 
exit occurs, how do you think it will go? Will it be a bitter, expensive legal 
battle or a delicate negotiation? What if it doesn't have to be either?

   Recognize the process of unwinding shared ownership could be problematic. 
Develop a process for exiting ahead of the need. Formulate a financial value 
for each ownership interest. Outline the time frame and interest rate at which 
a buyout occurs. And, define the types of situations that might trigger a 
buyout -- for example, death or divorce. In short, figure out how to get out of 
business together while you are still comfortable in business together. 

   As business ownership transitions to siblings and cousins, it is more 
difficult to stay in business together. Yet, many families do hold assets over 
several generations. A shared vision, good communication and the freedom to 
choose to be business partners helps set the stage for success in your family 
partnership.

   Write Lance Woodbury at Family Business Matters, 2204 Lakeshore Dr., Suite 
415, Birmingham, AL 35209, or email lance@agprogress.com.  


(AG)

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