What to Look for in a Family Business Consultant
Published by Family Business Magazine
In the past two decades a new type of professional has been knocking at the door of the family business market, offering to lead struggling family firms toward the Promised Land of business continuity and family harmony. Some business owners may be wondering what a family business consultant does and how to find one who is qualified and right for their family. Why do some family businesses need yet another consultant in addition to their traditional advisors - or do they? What sorts of questions can you ask in an interview to find out whether a candidate for a consulting job is, in fact, qualified and able to help you? What sorts of fees can you expect to pay?
To answer some of these questions, Family Business Magazine recently convened a panel of five professionals prominent in the field. The panelists were Thomas D. Davidow of Genus Resources, Nancy Bowman Upton, founder of the Institute for Family Business at Baylor University, Dirk R. Dreux, IV, formerly of U.S. Trust Co., and Ernesto Posa of Bain & Company. Following are some highlights from their discussion.
Family Business Consultants work with clients to address ownership and management issues as well as family issues. They may deal with questions of succession, authority and business responsibility, job descriptions and compensation. They should not be selling legal services nor should they be selling a product. The consultant should be very straightforward about any conflicts of interest. If they are selling insurance, they should tell you that. The best safeguard against disappointment is to be an informed client. Eventually, successful family businesses must ask themselves how they plan to finance their retirement. Where is the liquidity going to come from? "These are the issues I deal with," says Dirk Dreux, "and I leave the other issues to someone else." The role of family business advisor is closest to that of a rabbi, a minister or a priest, in that we pay attention to the whole person - in this case, the family and the business, with the focus on family harmony and business continuity. According to Nancy Upton, the most common reason for a family to hire a family business consultant is that they are having a problem in their relationships with each other. Rarely do they ask for help in solving a problem with cash flow or financing and the like. An advantage to hiring a consultant rather than using your lawyer or the accountant or some other traditional advisor is that a new intervenor can ask naive questions that other people do not think to ask, or because they've been over this ground before and it's a closed issue for them.
What can you expect to pay a family business consultant? Fees range anywhere from $1,500US to $3,000US a day. Often, however, a consultant will present a proposal and fee based on your specific project. Some projects take 90 to 180 days to complete, depending upon the complexity of the issues being addressed. The consultant will submit a letter to the client which outlines their understanding of the issues, what they are able to do, what is going to be accomplished and what it will cost. Some problems are broad and complex and require an ongoing process.
The panel agreed that your interests as a client will be protected if you keep the following questions in mind when shopping for a consultant:
- Training and experience.Does the consultant have an advanced degree in at least one professional discipline related to family businesses? How long has the person been doing this kind of work? Does the person's background suggest he or she looks at business and family issues as a whole?
- Conflicts of interest.Does the person have other sources of income besides what he or she receives from clients? Is he or she selling a product as well as consulting?
- Results.How long will the consulting process take, and how will successful outcomes be defined and measured? What is the consultant's success/failure rate?
- Fees.How will the consultant bill - by the day, the hour, a fixed fee, an agree-upon schedule of phased fees? Will "the meter" be on only during sessions with the client, or at other times, too, for example, when advice is given over the phone.
- Neutrality.Who is considered the client? The business, the owner, the family members? How will the person go about gaining the commitment to the process of all the key players?
- Personal qualities.Does the person relate well to all generations and both genders? Does his or her behavior in the initial session show an ability to create a comfortable, secure atmosphere in which family members can talk freely and candidly?
- Industry knowledge.Does the person either have some experience in the client's industry or demonstrate an ability to quickly digest what he or she needs to know?
- Values.Are the person's cultural values as well as other interests similar enough to those of the family to permit a comfortable and harmonious relationship?
- Other advisors.How will the consultant relate to the family's other advisors? What types of other experts - strategic planners, bankers, valuation specialists - might be needed to assist the consulting process?
- Structures. After the consulting is over, will there be mechanisms in place - an outside board, family council, retreats - that will enable the family to resolve difficult issues by themselves?
Once you have the answers to these questions, you will know whether you have the best candidate based on the consultant's compatibility with your family and their knowledge of your industry. Only then can you feel confident that they will lead you to the Promised Land.