Family Office- An Alternative Path

“Yes, there are two paths but in the long run, there’s still time to change the road you’re on” – lyrics from Stairway to Heaven by Led Zeppelin

While they have been around for years, family offices are gaining in popularity as a new generation of entrepreneurs that are coming into wealth are finding this vehicle an excellent way to carry on their legacy. There are now a number of family office organizations and education sessions as well as a growing group of service providers dedicated to this industry.  But, what is a family office, why form one and how can it work for me?

I have had the chance to talk with many clients and contacts that have formed or work at a family office.  Many are founded by a patriarch or matriarch who has a successful exit from a business but still wants the family business team to work together. They pool resources to share the costs of administration of their activities but also find that longer term goals are more easily accomplished working from a larger asset base.  The old strength in numbers adage seems to ring true here.  So, just some notes on my observations about family offices:

  1. The successful ones do have structure and in many cases, that structure resembles what the previously owned family business had in place
  2. A family office requires a discipline regarding decisions such as investment vehicles, seeking another operating company opportunity or perhaps a more structured approach to philanthropic endeavors
  3. This vehicle can provide opportunities to enhance the lives of the next generation. The atmosphere is usually less hectic than the day to day crisis environment of a family run operating company so there is more time for educating and exploring alternatives.
  4. Some have told me their family office provides the opportunity to do it right. Whether it is investment strategy or philanthropy, having some resources and time allow them to develop a more successful and effective approach to their goals.

Please keep in mind, a family office is not for everyone.  Many family run businesses are full of discord, are somewhat dysfunctional and a family office will not solve those issues.  If that is the reality of your situation, everyone going their separate way may be the best solution.  There is also the concept of multi-family offices.  Some families and groups are just more organized than others and they have used these skills to offer family office services to other families.  So, if you believe you could deliver this type of service to others or you want to consider your own family office, the best place to start is to talk to some of the professionals who work in this space.  Many entrepreneurs have seller’s remorse brought on in part, I believe, by not having something to go to.  After a long career usually at one place, they have a certain emptiness when they exit a business.  Many seek a meaningful place as the next phase in their journey and while not a “be all and end all,” a family office may be an alternative to fill that void.  You might just find it is not too late to “change the road you are on.”

Franchising – A Road to Entrepreneurship

Junior: “We goin’ Sizzler, we goin’ Sizzler,” – dialogue from the movie “White Men Can’t Jump”

Sorry, but when I thought about franchising, this was the first thing that came into my mind; that ought to tell you something.

So, the purpose of this blog is not to convince you to open a franchise or promote any particular brand (I do have clients in this space) but to give some pointers about exploring franchising as an avenue to becoming a business owner.  Some points to consider:

If some of the surveys that I see are correct, a higher proportion of people would prefer to own their own business than work for someone else. We all have theories behind the reason for this. I think the biggest is that most don’t see a long-term bond between employer and employee.  I was at EY for 35 years until I retired; I am not sure today’s generation sees that in their future.  Many view themselves at risk as a business changes versus the stability of the “old days,” so the theory goes that if I am at risk, then let me be where I feel I can have some control.

While many would like to own their own business, they do not know where to start.  Strategy, marketing, funding, execution, etc. are all great concepts but can be overwhelming when you have to start each with a plain piece of paper.  Enter the concept of owning a franchise.  A good franchise arrangement provides the following:

guidance – an operating plan with details on strategy including execution procedures

branding– a name and approach which has been proven before

training – on how to operate your business and make the most out of it

marketing and sales – proven techniques that have worked before to promote your business

It all sounds so good because in many respects, some of the typical risks in starting a business have been mitigated.  But, when it comes to considering how it may work for you, my thinking is that there are two different approaches.  The first is an investment approach. You invest in a location with the idea of opening a second or possibly more.  You may “work it” in the beginning to learn the ropes but in the end, you hire location managers, spread your overhead over a number of locations and look for return from the underlying operations. The second is what I call a lifestyle business.  You work one location to bring in a salary and perhaps a little profit, but you just look to pay back what you borrow.  In either case, you can become an owner with appropriate rewards.

There are two final items you should consider.  First, there is a Federal Disclosure Agreement which a Franchisor must file.  You should get it and read it for any franchise you are considering to study potential risks like excessive turnover and burdensome fees. You are usually committed to minimum fees for a long period of time once you sign so consider this carefully before you do.  Second, how do you get out?  If it doesn’t work out, what is the market to sell out?  Is it a closed market and can you expect some terminal value when you decide to leave?

Many entrepreneurs have found their place in a franchise operation.  Perhaps you can become one of them.