When you run a family business, you must make sure you’re considering the legacy you’ll leave behind for your children. That’s something Betty Uribe, Ed.D., Executive Vice President at California Bank & Trust, has firsthand experience with. She inherited a South American transportation business from her father, which she ran for several years from California with the help of various relatives.
“When my father passed away, I was left running the business — that’s why I am personally so passionate about this — it was completely overwhelming to me to have to learn the business,” Uribe says.
It took Uribe time to figure out what was working and what wasn’t, and she doesn’t want others to face the challenges she did.
Smart Business spoke with Uribe about understanding the banking needs of family-owned businesses, including looking beyond the immediate to the legacy you’re leaving your children.
In your experience, how do the banking needs of family-owned businesses differ from other businesses?
Technically, the business needs are the same for all businesses. However, the information channels aren’t always as clear in a family business. Unlike a regular business, family business ownership consists of: family owners, family-owner-employees, family employees and family members.
These bring different dynamics to the table. Take a recent example of a husband and wife manufacturing business, where he’s the CEO and she runs quality assurance. Normally the quality assurance people wouldn’t have access to the business books, but in this instance the wife can access HR records and banking information, and is a signer on the accounts. The structure of family business presents both challenge and opportunity not experienced in more traditional business structure.
But the biggest difference with family business is how you approach the business. In a family business there are four key areas that the owners must focus on: 1) the business, 2) the household, 3) the children and 4) the legacy. The fourth area is one many family business owners fall short on. They consider the business a legacy for their children but don’t do enough to prepare the next generation.
California Bank & Trust recently hosted six focus groups with its business clients, including many family business owners. It was surprising how few had thought about preparing their family for when they retire or if something were to happen to them.
This is something that’s really critical because they’ve worked so hard for many years to finally have a successful business. You don’t want to lose that by not having a generational transfer strategy in place.
What should family business owners be considering for long-term planning?
There are questions you can start to ask yourself, such as:
- Where do you see the business in 10 years? What do you see for the business long term?
- Who do you envision would own the business at this time? Does your spouse see it the same way?
- What’s the contingency plan if you or another key family member has to take leave? What would happen to your business if you suddenly became ill?
- What are your children’s greatest personal and professional strengths? Are they going to be the ones that take over?
It’s also important to remember there are resources available to help you answer these types of questions, and understand how to let go of control at the right time. You don’t have to know and do everything yourself.
That’s why it helps to align yourself with a banker who really understands your industry and the dynamics of a family business. He or she can provide you with the right type of business acumen and services to support your growth and plan for the future.
At California Bank & Trust’s last family business conference, several of the family business owners who attended said things like: ‘I wish I would have done this before I gave so much information and access to my son.’ ‘I wish I had stood my ground.’ ‘Just because he is my son doesn’t mean that he has the experience to be able to take on this position or to be able to be in this particular area.’
Only by having the right family business strategy in place can you ensure the family legacy remains long after you’re gone.