Addressing Family Dynamics in Business Succession - Part One (#275)

On this episode of the "Maximize Business Value Podcast," our Certified Mastery Partner host, Amy Morrin, and guest, Amy Wirtz from the Family Business Consulting Group, discuss the importance of addressing family dynamics during business succession planning. 
Tune in weekly to hear more from Mastery Partners and to receive relevant key content on your journey to maximizing your business value!

Podcast Chapters:
00:00 — Introduction
01:00 — Guest Welcome: Amy Wirtz
01:38 — Why the Family People System Matters in Exit Planning
03:36 — Case Study: How Lack of Communication Kills Next-Gen Succession
09:15 — Identifying a Family System That Is "Not Ready" to Exit
13:37 — Non-Financial Risks: When Family Dynamics Make a Business Unsaleable
16:42 — Why Culture Matters to Buyers and Private Equity
18:56 — Outro

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Learn More about Amy Morin
Amy Morin is an accomplished entrepreneur and Business Growth Coach who brings exceptional value to your network. She has an impressive background as a Certified EOS Implementer®, Outgrow Sales Advisor, and Certified Exit Planning Advisor®. What makes Amy truly remarkable is her real-world success. She co-founded and scaled a company from zero to $40 million in revenue across multiple states before executing a successful exit. Later, she purchased a struggling Montana fly-fishing resort, implemented effective systems and accountability measures, and transformed it into a profitable enterprise that she also successfully exited.

Learn More about Amy Wirtz
Amy Wirtz is a senior consultant with The Family Business Consulting Group passionate about helping families develop and define their purpose. She works closely with families to identify their goals around values, ownership, and financial wealth. To support these goals, Amy helps families establish family offices, family councils, and enterprise governance systems. Amy’s multidisciplinary background supports the unique challenges family businesses face. She holds a bachelor’s degree in secondary education and a law degree, and she practiced law for 27 years, ten of which were focused on collaborative law. She is also a trained mediator and skilled facilitator with deep expertise in conflict resolution, communication, and listening.

In 2024, the Exit Planning Institute named her Exit Planner of the Year in recognition of her outstanding work guiding family firms through successful transitions. Amy also serves on multiple family business advisory boards in Ohio. She is a sought-after speaker for organizations such as YPO, YPO Family Office, the Private Company Governance Conference, and The Exit Planning Institute.

Mastery Partners

Elevating Businesses to Achieve The Business Owner’s Dream Exit 
The unfortunate reality is that for every business that comes on the market (for whatever reason), only 17% of them achieve a successful exit. You read that right. 83% of attempted business transitions never reach the closing table. Mastery Partners is on a mission to change that. We ELEVATE businesses to achieve maximum value and reach that dream exit.

Our objectives are simple - understand where the business is today, identify opportunities for dramatic improvement, and offer solutions to enhance the business, making it more marketable and valuable. And that all starts with understanding the business owner’s definition of his or her dream exit.  
Mastery has developed a 4-Step Process to help business owners achieve their dreams.

STEP 1: Transition Readiness Assessment
STEP 2: Roadmap for Value Acceleration
STEP 3: Relentless Execution
STEP 4: Decision: Now that desired results are achieved, the business is ready for the next step in the journey!

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Transcript

Tom Bronson (0s): Welcome to the Maximize Business Value Podcast, brought to you by masterypartners, where our mission is to equip business owners like you to maximize your business value and achieve the exit of your dreams, whatever that means to you. With insights gained from over a hundred business transactions, we share real world strategies, lessons, and expert advice to help you build long term sustainable value in your business.

Each episode is hosted by one of our Mastery certified partners, their seasoned experts who've helped countless business owners navigate the complexities of growth, scaling, and building value. They bring firsthand experience, actionable insights, and a passion for helping you build a business that thrives. So, let's dive in.

Amy Morin (1m 0s): Hi, this is Amy Morin, and Welcome to the Maximize Business Value, a podcast for business leaders who are passionate about building long-term sustainable value in their businesses. Today, I am very excited to be joined by Amy Wirtz. Amy is part of the Family Bus Business Consulting Group. Amy, welcome to the podcast.

Amy Wirtz (1m 23s): Thank you so much. I'm so honored to be selected to be a guest on this podcast. And, and I love talking to you, Amy. We, we can talk for hours so

Amy Morin (1m 31s): We can Yeah. Sometimes it's over a little bit of wine.

Amy Wirtz (1m 35s): Yes, it is.

Amy Morin (1m 38s): All right. So I wanna start by unpacking a little bit about the problems that people don't tend to see. So, our focus today is gonna be primarily the family business unit, but not solely, but we, as exit planners, we tend to focus on the financials and the legal structure and a tax strategy of companies and getting that ready to, to, for a succession plan. You happen to spend a lot of time focusing on the family dynamics and the people system, and we're so grateful that you do.

But tell our audience as to why this matters and what happens when families tend to skip this part of the planning process.

Amy Wirtz (2m 19s): Well, I think like any decision making process, we have different things that impact how we go about selecting the final option, right? Like car or buying a house. But what gets more complex about businesses is that 80% of our family's wealth is tied up in an operating business. Normally, that's a statistically quote all the time, right? But on top of that, family businesses have their wealth at risk and their family relationships at risk.

And when we don't have conversations about the decisions we're making for transition of the, the business, whether it's inside transitions or outside transitions, meaning is it a family ownership that's gonna go to family again, or is it gonna go to management? Or is it gonna go to a strategic buyer in the field or an esop? Or are we putting it on the market, right? Or are we bringing private equity in? If we don't talk about that in the family, what happens a lot of times is our family system will kill the deal.

And so, so

Amy Morin (3m 29s): To Yeah. Unpack that a little bit. Where do you see that and what does that look like?

Amy Wirtz (3m 36s): I'm gonna give you like one or two examples. Okay. So I worked with a family, a, a, a long time ago, this was probably 10 years ago, that owned a farming equipment dealership, and it was going from fifth to sixth generation, and it was owned by two siblings and a cousin. And they only had one person in the next generation that was interested in the business. And they had a, a rule that you had if to own, you had to work there At some point you had to be okay.

And so the, the one cousin's like, yes, I want it. And they had a lot of really good financial planning and tax planning, but they didn't talk about the threats to the industry moving forward or what the plan of the next generation was. It was all focused on the current owners. And what they did is they created a succession plan where the one person was going to do a deferred compensation buyout of the three owners.

Right. And there's a lot of tax planning around that. There's some debt structure around it, you know, there's gotta be good cash flow to do that, but deferred compensation plans for it to be tax effective, need to last about 15 years on the average. Okay. Okay. Well, if they had talked to the next generation, they would know that his opinion of the market was he needed to sell in three to five years because the industry was going from small mom and pop shops to regional ownership, like three counties. Right.

So a friend of mine that was their insurance agent had trained in CIPA and called me and said, Amy, I think we have a problem here. Can you come talk to them? And I said, sure. So I came to talk to them and I talked to the next gen, and I went back to the, the owners and I'm like, can we get your advisors on the phone because I'm a little confused? And they said, sure. And I said to the advisors, did you know that the person buying this is looking to sell three to five years from now? Well, no, what does that do to your plan?

And it blows it up. And they were about to ink the steel. They were like two weeks away from inking the steel, but nobody talked to the next generation. And so the whole plan had to be redone. And they'd spent seven months on this plan, but talked to the next generation. So they didn't involve all the family, they only involved the current owners. They treated it like a non-family sale.

Okay, interesting. Yeah. Right. Because that's what they did. And, and that would just not have worked for that family. So in two half day workshops, we redid the deal by having all of the family there that needed to make decisions and their advisors in one room creating a plan that worked for everybody and really balanced out the tax advantages and the issues and, and set a price that was doable. So that was one thing.

Another thing I can tell you is I had a, a situation where a family was gonna sell, and one of the community community members, this was a sixth generation going to seventh generation construction company. And they were very involved in the nonprofit organizations in town. And one of the community members said, this is the stupidest thing I've ever seen. You're gonna sell this business. Why you've been such a great family company.

Well, their why was these two brothers owned with a cousin and one of the cousin's children came into the business, and it was a disaster. So instead of dealing with how do we make it successful, how do we put policies and education practices in to make it successful? They just decided, no kids can come in and we're gonna sell it. Well, that cousin died, and their perceived risk of his children coming into the business now is gone. 'cause they, they had a shareholder agreement where if somebody dies, you buy 'em.

It was like mandatory. It's called a, we call it shotgun agreement. So last man standing owns company is what that means. Okay. And so now it was the two brothers and they looked up and they're like, why are we selling it? Well, at this point, these two brothers are 77 and 72 years old. So their kids are like in their fifties and forties. Yeah. They've all worked. None of them have worked in the business. And they decided, well, we're going to do a family transition and we're gonna bring two family members, like each of us are gonna pick a kid to bring to the company.

And that's what they did. And they didn't have a meeting, they didn't talk about it, they didn't talk about leadership. They didn't talk about it with the family. Well, when two of the six were chosen and not the others that caused family problems. Yeah. The leaders that thought it might go to a management buy, which is what they promised them were pod Yeah, I bet. Really pod. So you see how I'm saying, like, not talking to the family, not having these conversations creates problems.

Yeah, for sure.

Amy Morin (8m 55s): Did I answer your So it's not, yeah, yeah. So it's, it's not just financially, it's relationally as well. Right. And then you have to sit around the Thanksgiving table, so at some point in the year, right. So yeah, it, yeah, we need to get people to start talking about it. You help families assess readiness for succession or exit. What does not ready look like from a people and family standpoint, not just operationally or financially, but you know, in this situation, it sounds like, you know, the LA latter situation that you talked about, we've got two adult males who came into the business that sounds like hadn't even worked in the business prior.

Right?

Amy Wirtz (9m 44s): Well, they were females. That was what was really our Okay.

Amy Morin (9m 46s): Oh, that's great. I love females in construction.

Amy Wirtz (9m 49s): They didn't have any sons, so all they had was the kids. So it was son-in-laws or daughters. That was awkward because they really didn't have a lot of respect for women. The two owners in construction, they didn't know what to do with them. The leadership team didn't really know what to do with them either. But, but, but let's talk about what it ready doesn't look like. Yeah. Ready doesn't look like when there is not alignment within the vision of transfer for the owning generation and the next generation.

So if I, okay, if I have three siblings and eight cousins, and the three siblings all worked there their whole lives, like from seven until they're in their seventies, they, they were at that facility picking up trash cans, emptying trash cans, handing out menus, whatever it was. Right? And their vision of ownership is that same dedication to being at the restaurant and hotel seven days a week, a family member just gotta be there.

Right. Even though now it's not one restaurant, it's a restaurant, a golf course, an indoor water park, and a boutique hotel. You know, it's more, right? Yeah. Yeah. They a lot more professional management and a lot more employees, right. Their vision of ownership doesn't meet the needs of the business or the next generation's vision of ownership. Right. And so what does deciding you have to work that mean work there mean for the next generation of cousins?

If they don't wanna work there, can they own, if they can own, in what way can they own? How do you set compensation in a way that meets everyone's view of fair pay, like a qualifying fair pay for those that work there and those that don't? Will you give dividends for the first time in the history of the five generations of ownership? Is there a new way to have financial benefit from ownership?

How do you balance the exiting leaders desire for money from the entering leaders? And how do you balance salary with the rights of ownership? All of those things. Does that make sense to you? Like that's misalignment. They haven't had any of those conversations.

Amy Morin (12m 23s): Yeah, yeah, for sure. You know, and you know, I've sold two businesses, right? The first was construction. I was a female in construction industry. And when we were getting ready to sell that company, we have two sons and asked our sons, you know, when they were in high school, they worked in the company, but neither one of them desired ownership. You know, two, be an owner to run that company. But we never had a conversation beyond that, Amy.

And it sounds like there would've been some other options that we could have explored that nobody, again, you know, one of the reasons that I became a certified exit planning advisor is because I say that I, I messed up my two exits. Like I, I, I just didn't have the knowledge. I didn't have the team behind me to have these conversations to get ready for an exit and realize really what is, what does the successful exit look like? And so, as I'm passionate about that, oh yeah, you're right.

You're right. Yeah. I did happen to get an MBA, which was way easier than the school of hard knocks. Hard knocks.

Amy Wirtz (13m 34s): Absolutely. Yeah. Yeah.

Amy Morin (13m 37s): So let's talk about a non-financial risk. So we have, you know, have you seen an example of a family business where the financials look great, the operations are strong, they're running on EOS, they've got a really good operating system and, and an accountability way of tracking accountability and metrics. Yet the people dynamics made the business un transferrable or unsaleable. What does that look like? Or what would maybe they have gone wrong in that situation?

Amy Wirtz (14m 12s): This is not a family I worked with, but I know of. Okay. Okay. Yeah. So a fourth generation multi, multi-business owning family owned several businesses. Right. And they, they refused to pick one leader because the branches wanted to make sure that their voice was at the top. So they put two leaders without proper roles, responsibilities, and authority set forth.

They did not have an aligned vision of the why of ownership, right? Yeah. They did for one company, but not for the biggest cash company. Okay. Okay. And so these two leaders came in with totally, I mean, they were following the mandates of their branches.

Amy Morin (15m 11s): Yeah.

Amy Wirtz (15m 12s): And, and they were at different stages of life. Like one was 36 and one was 42, 1 was having children, one's children were in high school, they like had different views of what working meant, right? Yeah. At that level. And one quit and demanded the other be fired. And so the chairman of the board, who was her father fired, the other president of the company.

And all, once they had no leadership. Yeah. And then one side went in and wiped out the board. Wow. So at the same time that they had no president, they also had no board because of the machinations of not having an aligned vision in the family ownership. Yep. And demanding that, like looking at it from branch system instead of from the family enterprise, that we all work together, we all row together, we all make money together.

It became a very destructive, dysfunctional approach to, you know, ownership and family relations inside a very large industrial complex that employed thousands and thousands of people. Wow. And that family stuff then puts all of that at risk.

Amy Morin (16m 42s): Yeah, for sure. You know, I just did a talk at the business transition summit, and I'm talking about this because of, you know, what you're, what you are describing there, Amy seems to me like a culture issue too, right? Yeah. If we have no aligned vision, I can't even imagine what the culture in all of those branches organizations were. And so a question from the audience was, I'm talking on the strengthening the four human capitals. And so I get to, you know, the human capital and the culture and the structural capital side, and I'm talking culture.

And, and one of the questions from the audience is, you know, if we end up selling to a PE firm, then why does culture matter? Because they're gonna come in and destroy it. Right? And I, I, that's, I said

Amy Wirtz (17m 30s): PE firm any good.

Amy Morin (17m 32s): Right? That was my response. So great to hear you say that as well. Yeah.

Amy Wirtz (17m 38s): Matter that someone who has had a really bad experience with a PE firm and there are bad PE firms, just like bad family businesses and bad partnerships and bad, you know, publicly traded companies and Right. Right. Now my question is, is the real issue, they might change the culture. And so for that owner changing what they built is seen as a failure.

Amy Morin (18m 2s): Yeah. Yeah. Right. Typically though, the data supports, I pulled data at the end of 2025 on what PE firms are looking for. And really a strong culture, strong leadership is more important to them right now than in operations, to be honest with you. So it's ally,

Amy Wirtz (18m 21s): The PE firm doesn't come into daily management. They don't. They don't. Right. Daily management, they wanna do high level Yeah. Ownership vision that, you know, produces a lot of value in a seven, two year window that keeps that company growing and producing. And a bad culture is only gonna do the opposite of that. Right.

Amy Morin (18m 42s): Exactly. Yeah. And we work on cultural alignment a lot in e os. Okay. So you describe your role as creating alignment across family and business systems, and what does that process actually look like? Amy,

Speaker 4 (18m 58s): Thank you for tuning into the Maximize Business Value Podcast. This episode is the first of a two part release. Part two will be posted next week.

Tom Bronson (19m 8s): Thanks for joining us for another episode of the Maximize Business Value Podcast. I hope today's conversation sparked new ideas on how you can continue driving value in your business. But remember, it's not just about listening, it's about taking massive action. Visit our website masterypartners dot com for more resources. Grab a copy of any of the books in the Maximize Business Value series on Amazon or via the links below.

And don't hesitate to reach out if you want to know how to apply these concepts to your business. So until next time, I'm Tom Bronson reminding you to relentlessly execute while you Maximize Business Value.