Pub. 6 2011-2012 Issue 4

November/December 2011 15 Extraordinary Service for Extraordinary Members. Dave Specht is the coordinator of family business programs for the College of Business and Extension Education at the University of Nebraska-Lincoln. Specht has gained national attention for his creation of The Family Business Continuity Audit © . To learn more about his work, visit www.davespecht. com or follow him on Twitter at @fmlybusinessman. needs to build a development plan or path. John Wilkins, president of Geneva State Bank, shared his concern about family-owned enterprises he works with by asking, “Are they preparing the next generation and laying the foundation that can carry them from one generation to the other?” Many banks and family business customers have large “knowing/ doing” gaps between top leaders and the next level of man- agement. Anything a bank can do to close those gaps will reduce risk and friction during leadership transitions. If your bank does not take this planning process seriously, it will be impossible to convey its importance to your customers. Family-Owned Banks Serving Family Businesses Continuing the family business fromgeneration to genera- tion is daunting to say the least. If your bank is family-owned, you have a unique opportunity to empathize with and assist customers in navigating the pitfalls that so often impede generational transitions. Banks need family businesses as badly as family businesses need banks, so working together to facilitate continuity is a natural fit. As you work with family business customers and think of your own family-owned bank’s succession plan, consider the three C’s of family business continuity to help you navigate safely. 1. Communication The lack of communication about intentions and desires of the senior generation is one of the most common pitfalls that cause family banks and family businesses to struggle. Encouraging and sometimes facilitating communication about a customer’s ownership philosophy, vision for the business, how they feel about the operation, and when they plan to take a diminished role in the operations are vital to the next generation finding success and fulfillment. 2. Contingency Plans (Management & Ownership) Each family should have a documented contingency plan in the event that their best-laid plans go awry. One banker shared an analogy of a farmer’s contingency plans for his crops and how the farmwill operate differently depending on price and timing, but that same banker struggles to be strategic about his own management and ownership con- tingency plan if things don’t go according to plan. Knowing how ownership will transition and communicating those intentions to the necessary parties will go a long way to preserve the business, but also will facilitate the preserva- tion of family relationships when difficult times occur. 3. Cash Flow Most successful family-owned businesses share one trait. They are usually asset rich and somewhat cash poor. In order for a business to transition to the next generation and for a senior generation to hand over the reins, a con- versation about cash flowmust occur. All parties involved must clearly understand the cash flowneeds of the retiring generation. The cash flow requirements of the business also must be discussed. If a family doesn’t take care of the cash flow question, they will either stifle the growth of the business or handcuff the senior generation from ever fully exiting the business. As you consider the business succession issues happening all around you, follow the example of our pioneer ancestors. View the goal of succession as bigger than yourself. See business continuity as something that will affect families, communities, and the state as a whole. Move forward with courage in your conversations and planning opportunities, no matter how daunting. If you are a family-ownedbank, take advantage of your heri- tage and experience and use it to help the multi-generational businesses you serve safely navigate the process. Avoid the pitfalls of not taking your own advice. Don’t be embarrassed if you are not as far along as you should be, but get started today. Your family, your customers, and your community deserve a thoughtful plan for your bank’s continuity. Lastly, remember the three C’s of family business continuity and deliberately seek clarity in each of them. Family businesses in Nebraska are “banking” on your success. Wagons move forward! Z