Every business founder will be faced with the same decision at some point – “How do I exit this business I have created (or inherited)?” Nearly half of all business failures are precipitated by the owner’s death. Regardless of what stage your business or practice is at, thoughtful planning and communication with your family and business are critical components in a smooth business succession. Understanding how business, ownership and family are often interwoven is one pathway to success in any business transition process.

1. Business, Ownership
and Family
Cornell University College of Veterinary Medicine
Ithaca, NY
April 27, 2015

2. Quiz
What is a family business?

3. Perceptions…

5. Succession Checklist
Definition of a
family business?
• Ownership control (>15%) by family or
partnership of families
• Strategic influence by family members on the
management of the firm
• Concern for family relationships
• The dream (or possibility) of continuity across
generations
Poza, 2007

8. The ultimate aim of ANY
business is…
VALUE CREATION!

9. What makes
family business unique?
• Presence of family
• Owners dream to keep in family
• Overlap of
– Family
– Ownership
– Employment
• Unique sources of competitive advantage

10. The Family Business 3-circle model
Family Business
Ownership
Tagiuri & Davis (1982)

11. Unique challenges facing
family business
• Unqualified family members in key positions within the
company.
• Communication of business issues is difficult enough,
however layered with challenging family matters, often
communication completely breaks down.
• Marriage and divorce plays a key role in family business
success and failure.
• Involvement of family members not employed by the
company.
• Family members in ownership versus management positions.

12. Why family business?
• 77% of all new business ventures established in
the United States are founded with significant
involvement of the family in the business.
• The public views small business as most trust-
worthy when it comes to spending efficiency.
Federal government is viewed as least efficient.
• 73% people say they trust a family business,
however, that number tends to decline after an
ownership transition.

13. Family Business Facts
• 36.7 % have written strategic plan
• Of those staying in family, 85% have selected a
family member to lead in next generation
• 71% of companies have no qualifications for family
employment
• 54% have shareholder agreements (“buy-sell”)
• 38% have liquidity plan
• More than 50% have regular formal valuations
• Boards in less than 50% cases meet more than once
or twice a year

14. The Bad News
• In their first 5 years of operation, approximately 85% of
entrepreneurial and family-owned companies disappear
• Among those that survive, only 30% are successfully
transferred to the second generation of the founding-family
owners
• Only 12% survive under current ownership to the third
generation
• Only 3% of all family businesses survive into the fourth
generation level and beyond.

15. Family …
meet Business

16. Case
Richard, Sr.
64
Founder
CEO, DVM
Ann
60
Bookkeeper
State senator
Grace
39
DVM
50% owner
Megann
35
MBA, JD
0% owner
Richard, Jr.
31
DVM
0 % owner

17. Governance
1. Do we need directors outside the family?
2. Are there skills and expertise that do not exist within
the family or board that would be beneficial to add to
the board (e.g. IT, marketing, strategic planning,
financial, etc.)?
3. What family members get a seat at the table and who
doesn’t (e.g. minority shareholders, family members
outside of the business with minority stakes or others
with no desire to serve on the board)?
4. Are there advisers out there who could add value or
expertise and an outside perspective without being
on the board itself?

18. Family & Business Governance
Family Business
Ownership
Tagiuri & Davis (1982)
• Family
meetings
• Family
council
• Family
office
• Board of
Advisors
• Board of
Directors
• Family
office
• Manage-
ment team
• All
company
meetings
• Conduit to
BOD

19. Veterinary ownership is
harder than it used to be

20. Meet Dr. Vitulli
• Five locations and counting
• Family owned florist shops growing up
• Shared leadership and role clarification
have been critical to growth
• Vitulli says, “The key to success, was
finding the right people to partner with.”
• Cornell DVM ‘91

21. Preparing for Succession
• Regularly have a qualified professional analyze the clinic’s free cash flow. Is it realistic to
think that a bank would lend money to someone interested in your practice?
• Advise your team that you’re beginning a ”long-term search” for a successor so they
don’t get edgy when you have potential associates or buyers in to look over your
hospital.
• Spend a few dollars keeping the inside and outside of the building nice. Your clients may
tolerate a “vintage” look but potential buyers are more likely to want good curb appeal.
• Maximize contributions to tax-qualified savings such as IRAs and your 401(k) plan.
Prepare for the chance that your hospital may not sell for the amount you need to fund
retirement.
• Scan the available information on possible clinic purchasers. Might you cultivate a
young competitor nearby? Does anybody at church or your favorite watering hole have
a relative in veterinary school? NETWORK.
• Get to know the secretary at the nearest veterinary school admissions office. If an
acceptance letter is headed to a kid in your town, four years later it might turn into an
available associate. After that, who knows?

22. Three reasons to plan early
…for your (business) exit
1. You’re not immortal
2. You could burn out
3. Buyers might not love your small town
Christopher J. Allen, DVM, JD

23. Rethinking the way we
teach veterinary medicine
“Online modules containing consistent, high-caliber finance and
business information taught by well-qualified professionals
should be a requirement in veterinary education. Additionally,
students should be required to study the various business models
they encounter during their education, e.g. teaching hospitals,
private practices, corporations and government organizations.
Solid finance and business acuity is essential to the economic
success of all veterinarians, irrespective of employment setting.”

24. “If there is one piece of advice we
would give to all family firms dealing
with succession, it is:
communicate.”
Chrisman, Chua & Sharma
One Word

25. Succession Checklist
Discussion
1. What excites you most about ownership?
2. What concerns you?
3. What role will your family play in:
• Your business / career choices?
• Your business ownership?
• Your business succession?

26. Succession Checklist
Connect