In a family business, multiple generations are involved and multiple family members run the business.

[00:40]

"And really the difference is that typically multiple generations are involved and multiple family members are running the business. It could be brothers, uh, maybe now they're in their 50s and 60s and the next generation is getting involved."

[01:03]

"Many times things get pretty complicated when uh, some siblings can feel like some members of the family are being given preference in the business or able to make a lot of money by working in the business, but perhaps that's not their passion."

[03:05]

"In fact, if a business has survived to last for generations, then you can bet they're doing something right because they've been able to support typically 10, 20, 50 plus employees and survive over a 15, 20, 30-year period."

Full transcript

Hello, this is Richard Wilson coming to you from Koala Lumpur in Malaysia. I'm here to speak at a family office conference and I just wanted to talk to you real quick about what is a family business. Um before I get started, you can see the Petronos Towers here behind me. Pretty uh cool modern part of the city here.

Um, but what I wanted to talk about was really what a family business is and why it's important and how it affects family offices, the investment landscape, those that work with high net worth investors, etc. So really a family business is what it sounds like. It's a business ran by a family, but many would say, well, isn't every business, you know, everyone, most everyone has a family. So how do you differentiate?

And really the difference is that typically multiple generations are involved and multiple family members are running the business. It could be brothers, uh, maybe now they're in their 50s and 60s and the next generation is getting involved. It could be a 80-year-old whose sons and grandsons and daughters are helping run the business. So, there are, you know, trust and estate issues to deal with.

There's structuring issues to deal with. Many times things get pretty complicated when uh, some siblings can feel like some members of the family are being given preference in the business or able to make a lot of money by working in the business, but perhaps that's not their passion. They want to be an artist. Uh they want to be an engineer, not a, you know, business manager or owner, but they feel like they've been slighted by the family um by not getting that same income level and wealth uh kind of growth opportunity that the other family members are getting.

And this can lead to succession problems and governance problems. You don't want a brother-in-law hiring his dorm roommate from 5 years ago happens to be his best friend as a consultant and paying him $5,000 an hour just so he can hang out with his friend or give out jobs to relatives that aren't qualified just because they're relatives, etc. So, there are a uh lot of challenges that are unique to having a multi-generational family business that really aren't around when you're just a solo entrepreneur or you've got a small business that maybe just has three to five professionals you just started in the last 10 years. Um or most common that you know you're a large midsize corporation with a diversified cap table or publicly traded company.

Um you know it's more professionalized than a traditional family business. The last thing I'll say here about what is a family business is that well I just gave examples of what's not a family business. It's important to know that just because it's a family business doesn't mean it's small. Um I'm helping a client right now look into purchasing a $20 million a year $5 million Ibida business.

Uh we typically during a year's time I'll have several $10 million a year plus businesses approach us that are familyowned. Many oil and gas businesses are family ran and have 30 million, 50 million, hundred million dollars plus revenue. And there are hundreds of family businesses have multi-billion dollars in revenue and are still controlled by just one family or two families or an extended family. So it doesn't mean small business.

In fact, if a business has survived to last for generations, then you can bet they're doing something right because they've been able to support typically 10, 20, 50 plus employees and survive over a 15, 20, 30-year period. They've been able to figure out quite a bit over that time and know the competitive landscape really well. And typically customers know their brand really well within their niche. So, um, we'll be pushing out more content and education on family-owned businesses and the family business industry in general, but I just wanted to start out with this, uh, quick video just kind of defining what is a family business or a family-owned business for those of you that maybe have worked with family offices, but not specifically heard the term a lot, you know, familyowned business or family business.

So, this is Richard Wilson coming to you from Malaysia today and hope to see you again soon. Thanks.