Oscarlyn Elder:
In many ways, family businesses are like any other. They measure their progress in terms of revenues and profitability, operate in a competitive landscape, and have a core set of values their employees follow. But the family dynamic sets these businesses apart, and families need to take a thoughtful and intentional approach to certain issues. I'm Oscarlyn Elder, co-chief investment officer for Truist Wealth. And this is I've Been Meaning To Do That, a podcast from Truist Wealth, a purpose-driven financial services company. We appreciate you listening.
This episode kicks off a series on running a family business. Future episodes will consider preparing the next generation for their role in the family, succession planning, and leadership. We'll also speak with someone who recently became the next-generation leader of a family business. For this episode, we'll focus on defining a family business, the different goals these businesses might have, and how to measure their success. And if you don't own a family business, that's okay. I think you'll be able to apply many of the lessons from this series to your professional and family life. If you want to take notes on today's episode, we have a worksheet you can download and print. You can find it by selecting this episode at truist.com/dothat.
My guest today is Russell Sanders, managing director of the Business Transition Advisory Group at Truist Wealth. Welcome to I've Been Meaning To Do That, Russ.
Russell Sanders:
Thank you, Oscarlyn, it's a pleasure to be here.
Oscarlyn Elder:
Russ, can you tell our listeners a little bit about what the Business Transition Advisory Group does and what your role is within the group?
Russell Sanders:
We work with business owners and their families to help them develop business transition and family legacy plans. And those two things often go hand in hand. Our goal is to engage with our clients and have proactive conversations about their goals and objectives and where they want to take the business and how they want the family to be involved with the business.
Oscarlyn Elder:
And, Russ, I want to point out, I think I'm right in this, that you actually helped create this particular team.
Russell Sanders:
I did. It was about nine years ago. Before creating this group, I was part of GenSpring family office and through the family office I worked with a lot of business owners and I really got to understand how family businesses operate. And so when they asked me to step out and start working with the BTAG group, it was a lot of fun and I have a lot of fun every day. I meet amazing people.
Oscarlyn Elder:
Thank you for sharing that. And before we really jump into the heart of our discussion today, I want us to take a step back. And, as you know, Truist is a purpose-driven financial services company. Will you share with our listeners your purpose?
Russell Sanders:
Yeah, happy to. My overriding purpose is to be a good person, a trustworthy person, someone that you can count on, and someone that is viewed as someone who cares.
Oscarlyn Elder:
Russ, thank you for sharing your purpose. What I would say is that for folks who know you, who interact with you, who watch you and have had the honor of being with clients with you, which I'm not sure if you remember, but you and I have been in client meetings years ago. Years ago together. I have complete confidence that you're fulfilling your purpose every day. So thank you for sharing that with us.
Russell Sanders:
Oh wow. Thank you. That means a lot.
Oscarlyn Elder:
Russ, I am so pleased to have you here to kick off this important series. I thought we'd start first by defining what is it that we mean by a family business? What are some of the main characteristics?
Russell Sanders:
There's no single definition. I think when you talk with business owners, what you understand is that they're all a little different. They're all unique in their own way. But if you're looking for common characteristics, then I think you have family ownership in whatever form that may take. You have family management or at least family influence over the business. You have perhaps a multi-generational component to the business. There's more than one generation of the family involved or owning the business. These businesses typically take a long-term horizon with a focus on sustainable growth. And, finally, these businesses internalize and incorporate into their operations the owner's or the family's values.
Oscarlyn Elder:
So, Russ, tell me more about the values part of what you just shared. How do values show up with these family businesses? What are some of the ways? And I know there's not just one way.
Russell Sanders:
Yeah. If you go back and you look at your prior podcasts, you talked about values, and on the worksheet are, I don't know, 30 values. If you go back and you look at those—achievement, innovation, endurance, responsibility, collaboration, independence, productivity—these are all things that you find when you talk with business owners that they value. And I just met with a business owner Friday. And getting ready for the meeting I went online, I looked at the business, I looked at their website, and right up front they had their vision, their mission, and I'll read it to you. It says, "We believe in growing sustainably value-first relationships throughout the industry. Trust, dependability, and integrity has always been the fuel that propelled our business." So right there are the owner's values and what they prioritize in growing their business and how they'd like to grow their business. If you want to see another example on the other end of the spectrum, you can Google Mars and look at their website.
And this is a 100-plus-year-old family business, international family business. But their values are listed, and they're very focused on their employees and bettering the lives of their employees and everybody who's in their footprint. They focus on a healthy planet, thriving people, and on nourishing well-being. Their aspiration is to inspire moments of everyday happiness. These are kind of core values that help drive the direction, drive the growth of that business. And as you go back and you look at the websites of a lot of the family businesses that we work with, you see very similar things. You see these values, and you see them putting these values right up front on their webpages.
Oscarlyn Elder:
Russ, that is extremely helpful for us to get a sense of the values that you tend to see when you're working with family businesses. And I would just point folks to the episode that you just mentioned. It's episode number two. And if you go to truist.com/dothat and look for episode two, there is a PDF within that episode content that lists, a PDF that has 30 different values.
Now, our teams, when they're working with clients directly, often will complete an analysis that points to over 200 values, but we've distilled those into 30 values that are fairly common to folks. And that worksheet details those values and helps folks step through how to determine which values may be important to you. So if you're someone out there who's beginning to think about founding a business or you're working with your own family business and you'd like to refresh maybe how you're thinking about your values, I would just point you to that site, and that PDF is available to you. Russ, once a family establishes the core values that are critical to the family business, do you see them coming back and revisiting those values over time? What's a best practice as far as keeping the values front and center to the business?
Russell Sanders:
Yeah, that's a great question. And I think that a best practice is for families to dust off those values from time to time and to go back and to look at them and to make sure that they're following the values, that these are the same values that are important to the client today as they were in the past. And I think that that's a very important point to think about is that values evolve, values change. As new generations come into the business, their values may be slightly different than the founder’s values. And it's important to revisit the values and to make sure that these are still the list of values that we, the collective family, still believe represent who we are. And therefore we want our business to represent what these values are as we continue to look for growth opportunities.
But values do change. And I think that everybody gets caught up in the day-to-day. It's very time-consuming to run a successful business, and you have to have a successful business. The focus naturally tends to evolve to the financial aspects of the business. But I think that it is worthwhile from time to time to stop and to pull out the values and to sit down with the family and key employees as well, and to make sure that these are still the values that we believe in and that we want to pursue as we look for new opportunities.
Oscarlyn Elder:
Well, Russ, we have been so fortunate to work with families that are really living out their values and their purpose through their business in many different and meaningful ways. Next, I'd like to take a deeper dive into the goals of a family business.
As I mentioned at the top of this episode, a family business can mean more than revenues and profitability. Russ, will you share with us some of the common goals of family businesses?
Russell Sanders:
So, I think you know this, and most people who know me know this. I'm an avid reader. I'll read just about anything I can get my hands on. And there's a very good book out there written by the Harvard Business Review, published by the Harvard Business Review called The Family Business Handbook. And in that publication, they talk about goals. And I really like the way that they kind of frame this part of the conversation, and they created what they call the owner strategy triangle.
Oscarlyn Elder:
Tell me more about that.
Russell Sanders:
Visualize a triangle, three corners. And the three big goals are growth, liquidity, and control. And when you start looking at setting your goals, you're always thinking about what are our goals for growth? What are our goals for liquidity, distributions, money coming out of the business to support the family, and what are our goals around control? How much control do we want to maintain? How important is it that we have the final say in how this business functions? So as you start looking at this, you start making trade-offs. So for example, growth. If growth is your primary goal, then maybe you take on an equity partner, and that will allow you to blow this business up faster.
Oscarlyn Elder:
Or grow it.
Russell Sanders:
Or grow it.
Oscarlyn Elder:
When you say blow it up, you mean grow it. I want to translate for folks.
Russell Sanders:
Blow it up in a positive sense.
Oscarlyn Elder:
Blow it up in a positive way.
Russell Sanders:
That's right. Grow it. But if that's what you want to do, then you may have to give up a little bit on the control side because obviously that equity partner is going to want a say in how this business is run. And so that's how I think when you're starting to formulate goals, and that's why I like the way the Harvard Business Review kind of diagrammed this. It's always those three things, and it's always a balance between those three things. Growth, liquidity, supporting the family, and control.
And there's lots of goals that businesses have: providing a source of family employment or family engagement; that's a goal you see. Educating the next generation and even the employees that work for you about the benefits of hard work and the payoff of hard work, providing a good work environment for employees. That's a big one that I see. Becoming the best business in whatever you're making or whatever service you're providing. And that's important. It's the best business, not necessarily the most profitable business, but a business that does things a certain way that just uses the best materials, even though they may cost a little bit more, your goal is to be the best in your particular field. And being good corporate citizens; that's a mouthful, right? You hear that quite a bit, but you see this quite often with family businesses in the sense that they're very engaged with the community; they're very involved with the community. And so there's lots of goals, but I think the goals will always kind of center around those three. So think of the triangle, growth, liquidity, control.
Oscarlyn Elder:
So we have those base goals: growth, liquidity, control. And then you mentioned several others having to deal with the business could be seen as a source of family employment, right? The business could be seen as a quality leader within a specific space. Also, the family could view the business as a key impact driver within either an industry or a geographic location or whatever the scope may be. So again, I heard the three core, and then I heard there are other goals as well that we see families pursuing that are important to families. And so we've got these competing or various types of goals that these family businesses can have. Russ, how do you see leadership in these family businesses deciding which lever to pull on, which goal to optimize or maximize? What's the decision-making elements within family businesses around how to balance and achieve these various goals?
Russell Sanders:
There's always a focus on sustainable growth. And when we were talking about the definition of a family business, that was one of the aspects that I mentioned is sustainable growth.
Oscarlyn Elder:
What do you mean by that? So I want to make sure, because the word sustainable can mean different things to different people now. And so when you're using it in this context, what are you really talking about? How would you define it?
Russell Sanders:
It means not taking on too much risk too fast to chase the highest returns. It means having a focus on the business and the continuity of the business and protecting the business. Because, look, COVID is not that far away in our memories. And everybody realizes that things can change. And so you need a business that is growing, but you don't want to commit yourself too much and go after too high of returns to where if something like a pandemic were to happen again, the business would be in risk. And so when I say sustainable growth, it is as they look to make investments, they want to first make sure they're not over-leveraging the business, that the business is on a sound foundation, and that this next venture makes sense and it's not putting the business in jeopardy. They're not committing too much capital to it.
Oscarlyn Elder:
That's very helpful. So you've defined what you mean by sustainable growth. What are the decision-making processes that you've seen within family businesses? Again, to help decide which goals do I want to go after and in which order.
Russell Sanders:
The business has to be successful. If the business gets in trouble, then we have a different conversation entirely. And so that growth goal, sustainable growth, as we've been talking about, that's always a top priority for business owners that I meet with. But they have other priorities. So providing liquidity to the family, providing a means of support. After all, we're talking about a family business. This is the economic engine of the family. It needs to generate some amount of money to the family to enable the family to live the life that they want to live. So balancing out how much do you keep within the business and invest for future growth versus how much do you distribute out of the business to the family so that all of the family members can live their lives and live their lives the way that they want to live their lives. But you also see business owners are very focused on their employees and they want to provide, as I mentioned, a good work environment for their employees.
If you go back to the Mars example and you go onto their website and you read the history of that company, they talk a lot about giving back to their employees and the Mars University and helping them be successful, not only in the company, Mars, but in life. And you see that a lot with the business owners that I meet with is that they want to provide a good work environment for their employees.
And look, that's not pure charity. You can look at studies, and studies say that if you have long-term tenured employees, you typically have a better business. Because they understand the business, they understand you, they understand how you'd like to see things done, you can rely on them. There's trust that builds up. And so it works both ways. These things aren't mutually exclusive. They go together. But I've seen a lot, I mean, every business is different. Every business has a slightly different focus, but they all kind of follow those big goals that I talked to you about, about the growth, the liquidity, and the control. And it's just different degrees amongst all of the businesses, different levers at different times.
Oscarlyn Elder:
And that would lead us to a place of how those businesses define success could very much vary depending upon which point in the triangle they're pointing to at a specific moment. And so, as they're thinking about their success, I get the sense it's multifaceted. So to your point, profitability, cash flow are often mission-critical. You've got to maintain certain elements to be financially successful, but beyond that, there are likely additional elements, additional metrics that they're looking to, to define their success.
Russell Sanders:
That's exactly right. And I think that's what's so special about family businesses is that they can define success any way they want to define success. They're not tied to quarterly reports, they're not tied to shareholder meetings per se. People even really expect family businesses to function a little bit differently from public multinational corporations. And it's tied to their goals, it's tied to their values, it's tied to their focus. And so, yeah, I think that they can define success any way they want to. But there are those two big overriding things, right? One is a successful business, a sustainable business.
And, look, I mean going back to that, I don't want to spend too much time on it, but business owners really struggle with that when they're looking at growth opportunities and how far should they be reaching? I'm working with a business owner now that they've made small acquisitions in the past. They're now looking at one that is not too much smaller than they are. You can kind of tell they're a little bit outside of their comfort zone because in order to do this, they're going to have to take on debt. They're going to have to use some of the cash that's sitting on the books of the business. And that makes them a little uncomfortable because of what we've been talking about during this podcast of sustainable growth and the focus usually being on sustainable growth.
This is a reach. And so they're really struggling with, from a business course 101, does it make sense? Absolutely. But is this the type of growth that they want to do? Are they willing to kind of put the family name, put the family comfort, family safety on the line one more time to roll the dice to kind of scale this business up? And you see that quite a bit, but going back to defining success, it is one, do you have a sustainable business? And then the other is, do you have harmony within your family? Is the family supporting this business? Do they still support the business as the generations evolve?
Oscarlyn Elder:
Well, Russ, this has been a great conversation. You've given our listeners a lot to think about. And really you've provided us with a primer on family businesses, and the thought of that triangle is going to stay in my mind forever. I'm confident of that. So I just want to say thank you for what you shared, and we really hope together that our listeners are going to find this episode helpful as they listen to the other ones in our family business series. So you're kicking us off, and we're going to follow this episode with other episodes that are going to explore communication and preparing the next-generation leader as well as talking to a next-generation leader. So I really appreciate you setting the table for additional conversations that are going to follow.
Russell Sanders:
Well, thank you, Oscarlyn. It's been a lot of fun. And I think, as you can tell, I can talk about this forever, so.
Oscarlyn Elder:
I know you can.
Russell Sanders:
This went by really quick, and thank you for having me on.
Oscarlyn Elder:
Now, Russ, before I let you go, we do have this tradition at I've Been Meaning To Do That of asking our guests about what they've been meaning to do. So what's the one thing that you've been meaning to do but you haven't done and that you're willing to put out there for everyone to hear that you're going to commit to do in the future?
Russell Sanders:
My wife and I were talking about this last night, and I am going to plan a family vacation. We haven't been on one as a family in a couple of years for various reasons. My kids are of the age where they're graduating college, they're starting new jobs, they're moving to new cities. We're starting to get spread out. Everybody's starting to get very busy in what they're doing, and I think it's time to kind of pull the family back together and have a family assembly and just get everybody back in one room and being together and just let it happen and enjoy being around one another.
And that's really important, and that's how we stay together and we stay loving one another and stay in one another's minds. And I think we all need to be mindful of that. And I'm out there talking to business owners about the importance of thinking about your goals, thinking about the values underlying the business, thinking about how this meshes with the family. And here I am two years out and I haven't taken a vacation with my own kids and had my own family assembly. So that is what I'm going to be focusing on, and I'm looking forward to it.
Oscarlyn Elder:
Russ, that is a really wonderful I've Been Meaning To Do That item, and I'm excited for your family vacation. I hope you pick someplace wonderful. But regardless of what you pick, what you're saying, it's really about the deliberate time together and the connections, creating those memories, creating those conversations that you are saying, "Hey, I need to do this for my family, for our connectedness." And that's beautiful. So I'm going to check in with you, I promise, to see how that vacation goes. And let me just say once again, it has been a real pleasure to have you on the podcast today.
Russell Sanders:
Thank you, Oscarlyn.
Oscarlyn Elder:
And for you listening, thank you for joining me today. Keep an eye out for the rest of this series in the coming months. If you liked this episode, please be sure to subscribe, rate, and review the podcast and tell friends and family about it. If you have a question for me or a suggestion for this podcast, email me at dothat@truist.com. I'll be back soon for another episode of I've Been Meaning To Do That, the podcast that gets you moving toward fulfilling your purpose and achieving your financial goals. Talk to you soon.
