Case Studies

Case Studies

A sampling of our family business consulting engagements.

Family Business Consulting Case Studies

Risky Family Business

A father handed over a thriving real estate development business to his son without proper succession planning, development and transition period and then opened up a supply business (with the son as his only customer), and counted on this for his retirement nest egg. The son promoted high school buddies beyond their capabilities and lost control of the finances. Banks started to pull lines of credit while mismanagement resulted in lost contracts.

Blum & Savlov immediately identified key issues and took quick action on the most pressing ones. Job descriptions were developed and employees assessed for suitability; they were left in place, reassigned, or terminated accordingly. Meetings were arranged with banks and restructuring plans presented and approved. The son was referred to a support and development group to get advice from and exposure to more senior CEO’s. Dad was eased back into the business for a more prolonged transition period. A woman in the family with business education and great ideas was overlooked because of the family’s cultural bias toward men as leaders. We brought this issue up in a way that encouraged the family to discuss it respectfully and to consider the possible harm to the business and family relationships that was occurring by not taking advantage of this resource. She was given substantially more authority. Business and family relationships improved significantly.

Key Lesson: Transferring a family business from one generation to the next calls for a long-term development plan and plenty of direct communication. Cultural blind spots can lead to missed opportunities and lost potential. We are experts at helping family businesses make this transition while strengthening the family and the business.

"I'm Getting How Much Money in Eight Months?"

A father reached out to us feeling very upset. His daughter, a high school senior, would have complete control over a seven-figure inheritance in eight months and dad had never told her about it. The daughter knew there was "some money" coming but had no idea how much. The father’s relationship with the trustee, an attorney and trusted advisor of the deceased mother, was strained since he had made requests for reimbursement from the trust for expenses that were often barely related to the daughter’s needs.

We worked with father and daughter to open lines of communication and clarify general values about life and future possibilities before addressing the specific financial realities. Dad was surprised to learn that his daughter had a better idea about the amount than he realized, and that she was nervous about having control over such a large amount while going off to college in another city. Meetings with the pair revealed a strong philanthropic streak in the daughter; she decided to save most of the bequest, and then use some to target meaningful causes and fund her studies. We facilitated the introduction of the trustee and the daughter and developed an educational plan to help her learn about the investments and plan for future management of the assets.

Key Lesson: Parents often avoid open discussion about family wealth and fear this knowledge will have negative effects on the motivation and character of children and young adults. In fact, children usually have a good idea about their family’s wealth; by starting early we help families integrate their life values with developmentally appropriate discussions about family assets to develop emotionally healthy and financially thriving people of good character.

Trustee-Beneficiary Tensions

A trustee, a large bank, contacted us as their relationship with the beneficiary of the trust had deteriorated and legal action was threatened. The beneficiary was also struggling with addiction and was pushing the limits of what the trust could pay for. Often, inappropriate requests for funds (as well as unreasonable demands on the trustee) were made in response to addiction-related incidents.

We met with the bank trustee and executives to learn the history of the situation. We then developed and implemented a plan that began with educating the bank professionals about the dynamics of both addiction and inherited wealth, and how the latter was serving as an enabling factor. The beneficiary was encouraged to volunteer for an in-patient stay at rehab and agreed. Eventually, it was possible to educate the beneficiary about the workings of the trustee/beneficiary relationship. Key to the plan’s success was coordinating with rehab counselors about the significant wealth involved and how it was enabling the addiction. This knowledge could then be woven into the recovery process by rehab counselors and, particularly, peers in rehab who could encourage the beneficiary to make better choices even when access to cash through the trust was possible. The addiction recovery began, the beneficiary developed a much more realistic understanding of the trust, its terms and the role of the trustee, bank professionals were better able to comfortably carry out their fiduciary responsibilities and legal action directed at bank was averted.

Key Lesson: Personal problems can muddy the relationships with trusted advisors who by themselves are often not equipped to spot and address these problems. As skilled facilitators, we can shortcut these problems and build a path back to solid relationships.

Professional Association in a Quandary

A large professional association whose members are primarily family owned businesses noticed that member businesses were running into difficulties transitioning the businesses from one generation to the next. This was occurring despite access to top legal, accounting and finance professionals.

We were brought in to deliver training with our emphasis on family-business interplay. We guided association members through best practices for transitioning a family business to the next generation, and developing next generation family members to participate. Main areas of focus were: starting early, managing expectations in both generations through frequent and open communication, using a transition period of multi-generational cooperation, writing a formal development plan and evaluating progress, developing a family employment policy, getting feedback from key family members in and out of the business and reaching out to trusted non-family employees in the business. A three-system model of family business focusing on ownership/governance, family, and management systems was used to assist members to envision the many ways that family members (and non-family members) might (or might not) be involved on the business.

Key Lesson: Organizations serving enterprising families are sometimes not equipped to intervene in problem areas these families experience. Our knowledge of the unique complexities and demands of family businesses can make it much easier for association managers or professional advisors to navigate and succeed in these waters.