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Episode 26: Succession Planning for the Family Business

In the episode of the Family Business Show, Michael Palumbos, alongside guests Rob Ferguson and Allison Comstock Moss, delves into the intricate world of succession planning for family businesses. Broadcasting from a snowy Rochester, New York, the conversation explores various facets of transitioning leadership and ownership within family-operated companies.

The dialogue opens with personal insights from both guests, who share their experiences and expertise in succession planning. Allison, having personally undergone a family business succession, emphasizes the importance of involving the next generation in the planning process to ensure the business's continuity and success. She also highlights the necessity of educating and empowering the next generation to prepare them for their future roles.

Rob shares his rich background in family business and succession planning, recounting his experiences from both successful and struggling family businesses. He emphasizes the significance of understanding whether a business is family-first or business-first and how this perspective shapes succession strategies.

The conversation touches on the psychological aspects of succession, addressing the identity crisis many business owners face when considering their departure from the company they've built. The importance of transparency and communication is underscored, with both guests agreeing that these elements are vital in minimizing misunderstandings and conflicts within the family.

Creative strategies for succession planning are discussed, with examples demonstrating how families can tailor their approach to their unique circumstances and values. The discussion acknowledges the challenges and complexities of succession planning but also highlights the opportunities it presents for family businesses to thrive across generations.

Overall, the episode offers valuable insights into the nuanced process of succession planning in family businesses, emphasizing the need for clear communication, involvement of the next generation, and strategic thinking to ensure the business's longevity and familial harmony.

Watch the entire episode!

Episode 26 Transcript


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Michael Palumbos: Welcome everybody to the family business show. My name is Michael Columbus with family wealth and legacy in Rochester, New York, where it is currently snowing.

 

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Michael Palumbos: So for those of you who are living in the rest of the country or someplace in the world where it's not. You're smarter than I am right now.

 

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Michael Palumbos: Today we're going to be talking about succession planning in the in the family business. And we're really blessed. We have

 

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Michael Palumbos: Rob Ferguson and Allison Comstock moss with us here today, and both of which you know i know really have great deep knowledge in this arena.

 

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Michael Palumbos: Allison, like myself, has gone through a succession within her family. And so we've got lots of great you know conversations that we're going to have some questions that will answer today. So welcome, Allison and Rob appreciate you joining us today.

 

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Thanks.

 

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alison moss: So,

 

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Michael Palumbos: As we always do we like to kick off the show with you know this this topic of family business and actually getting into, you know, working with family businesses is

 

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Michael Palumbos: It's unique there's not, it's not everybody you know nobody goes to school or at least they didn't 10 years ago I guess they do now, but they didn't go to school 10 years ago to become a family business, you know,

 

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Michael Palumbos: Consultant or coach and and we do today. So Ellison, why don't you kick us off and tell us about your journey and how did you get

 

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alison moss: That so yeah that's that's a great point because people ask me about my background. And when I was in college over 20 years ago there was no program to learn what I've been doing for 20 years so

 

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alison moss: I'm thrilled that there are now better programs available for those who do want to concentrate on this for me, it was very much am

 

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alison moss: A combination of an apprenticeship by tagging along with meetings with my father for family businesses and also just discovering a personal passion for areas that are affected by family businesses, but I felt

 

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alison moss: A deep desire to help improve upon for all those involved. So I started my first presentation with my father was when I was 15 years old and it was it was about family philanthropy and what are the benefits of including your entire family on a charitable

 

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alison moss: Journey and using that as a platform for them bigger decisions down the road.

 

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alison moss: So that what I didn't know back then was what started a journey for key and I in our shared love of helping people thrive with the experience that we're having with their wealth, whether it be liquid assets or in a business and

 

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alison moss: My

 

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alison moss: Niche, if you will, is on spending time with the next generation and providing them a level of education and a listening ear that I was discovering hadn't been offered very often.

 

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alison moss: And really wanted to provide them a platform because their parents had been working on this for years and years and then it was just kind of thrown out of it. And it's a great gift but there really needs to be more lead time for them to be successful with most of that. And so I

 

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alison moss: Embarked on creating empowering beneficiaries as a sister company to Comstock with the purpose of focusing on that.

 

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alison moss: And as a result, developed what we call beneficiary boot camp. Again, just, it's about focusing on providing information and empowering that next gen to succeed. Instead of, well, figure it out.

 

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Michael Palumbos: trial by fire.

 

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Michael Palumbos: Yeah, yeah. Now you and I have a very similar background, but I did not start when I was 15

 

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Michael Palumbos: So good for you. That's great. Thank you for joining us.

 

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Michael Palumbos: Rob FILL US IN give us give us the background, what do we need to know about. Yeah. Where did you come from.

 

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Michael Palumbos: How I when I was in college 40 years ago.

 

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Rob Ferguson: So there was no such thing as any kind of family advisory family offices. I did have the experience of family business through my two grandfather's

 

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Rob Ferguson: One was a banker. He started out literally as the custodian for the bank and ended up buying the bank.

 

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Rob Ferguson: And owning it and running it as a president for 50 years and my other grandfather was a florist in Bloomington, Indiana, and was very successful. And so I got to

 

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Rob Ferguson: I never knew I was really being indoctrinated to family business. When I was sitting around the table, listening to my two grandfathers talk about their, their comings and goings in their life and

 

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Rob Ferguson: After my college I went into the military and then went to corporate america eventually

 

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Rob Ferguson: Became a CEO of a private company that went public took that company public really enjoyed that. And that's where I really honed my

 

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Rob Ferguson: My business acumen and perhaps even my financial skills.

 

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Rob Ferguson: And then when I went to go conquer something different. I was still very young at the time and

 

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Rob Ferguson: took on a project for a fifth generation run business. It was 100 years old and the packaging business 17 cousins and bottle and I went in as the first non family member CEO.

 

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Rob Ferguson: And and and then business was struggling. It was definitely in the zone of insolvency, and my, my job was to go in and fix it and then

 

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Rob Ferguson: monetize it for the family shareholders.

 

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Rob Ferguson: Which I did do concurrently. I was on a board of directors for a nother hundred year old family.

 

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Rob Ferguson: I help them in their little private equity firm that they had inside their family office and this family had probably 50 family shareholders and it was wildly successful

 

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Rob Ferguson: And over two and a half, three years. I got to know both families, it truly was like the tale of two cities, my whole background was on leadership. It was on scaling businesses m&a where and I didn't really appreciate

 

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Rob Ferguson: The uniqueness of family businesses and I learned some best practices that help this one family business be wildly successful

 

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Rob Ferguson: And then I learned best practices that were being ignored or pitfalls that the other fifth generation had fallen into and that is where my passion really developed to

 

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Rob Ferguson: To help other family businesses, avoid those pitfalls and I really believe my experience tells me that family or the businesses in general are are are living organisms and they can live forever.

 

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Rob Ferguson: Unfortunately, when we human beings get involved in it. We can kill those things pretty quick.

 

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Rob Ferguson: And that's why the succession results are so so bleak. Once you get past the third generation Vinny family business and

 

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Rob Ferguson: And honestly, I'm also inspired to help as many folks as I can, family businesses. We know represents over 60% of the GDP and

 

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Rob Ferguson: I figure if I can do my part in my little bitty corner of that I can make a difference and help others grow and develop so

 

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Rob Ferguson: Essentially that's what I've been doing the last 11 years after I left corporate I formed this advisory and consulting business and really enjoy it. And I've met some fantastic people on the way, such as Allison.

 

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Rob Ferguson: She has collaborated with me on other clients and we both enjoy working with one another as well as working with our clients. We have a similar passion to serving and helping others right

 

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Michael Palumbos: Well, again, thank you both for joining us. Rob, just based on a few things that you just said, You know, I want to

 

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Michael Palumbos: Let her out, you know, let the audience know you talked about, you know, the business is a live in Oregon is living organism.

 

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Michael Palumbos: And I would highly recommend if you haven't read it yet. Grab the book The infinite game. That's the game. The book that we did in our last book club.

 

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Michael Palumbos: And it really it really lends itself to that thinking and helps people to, you know, think through that as as they're making decisions running the business.

 

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Michael Palumbos: And then the other thing that you said is just that how unique. The, the family businesses, but when it gets even more unique when you have non

 

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Michael Palumbos: Family or family members that are not managers not working in the business, but their shareholders and and then you have the shareholder working in the business group and they really

 

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Michael Palumbos: You know, it's very, it's a juggling act between those two groups, the last show that we did so for the listeners last show that we did. That's what we focused on was, you know, making sure that you're bringing in the non

 

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Michael Palumbos: The non managing partners, you know, shareholders into the conversation, you know, or in if not it's at your own peril. So, but today we're

 

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Michael Palumbos: Focusing on succession planning in the in the family business. And, you know, Allison. Why don't you kick us off and the you know the the first thing that that we wanted to talk about is

 

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Michael Palumbos: Why is it, you know. And I mean, Rob. I'm going to come over to you in a second. You know, so you get the

 

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Michael Palumbos: You get to sit back and you formulate your, your thoughts when Alison has to juggle this one, but why many family businesses, I don't think, have a succession plan right now.

 

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Michael Palumbos: You know, we read in the paper that you know within the next five to seven years. There's just this giant group of Pete, you know,

 

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Michael Palumbos: Number of family businesses that are going to change hands, but only 30% of them have a written documented where they know what they're going to do succession plan. Why

 

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alison moss: Yeah, so they're hard. I think the first one. It's not easy to do. It's not like you get out a checklist and go through it and fill in the blanks.

 

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alison moss: You can't

 

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Michael Palumbos: Get balance that out, you know, you pull the checkbook out and

 

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Balancing

 

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alison moss: It doesn't work that way. And when you think about what made the business successful and then going to identify how can it continue to be successful. Who are the players and

 

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alison moss: There's so many dynamics and then when the soon as you get it figured out. It's going to change. So it's a process with no real end in sight that can feel very daunting.

 

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alison moss: And if someone is sick in growing a business planning for succession can feel like it's detracting from the immediate benefits of growing the business and the immediate financial benefits. So it's something that's

 

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alison moss: That can feel daunting. And we have some families where they're like well the next gen can figure it out. And so when you've got a current business owner who doesn't really feel

 

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alison moss: Any desire to do it. I see that less often more often. I see it. I don't know where to begin. And so that the overwhelming. This can paralyze people

 

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Michael Palumbos: Right. It makes it easy to put things on the back burner, especially in but I do like what you said, you know, when

 

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Michael Palumbos: When you're growing the business. I'm in there running it. That's where my juice. That's where my energy has come from all these years and you want me to talk about giving up the ghost today, you know, and not and not. Yeah, Rob. Comments, thoughts.

 

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Rob Ferguson: Sure, I agree with Allison. It's hard as probably the number one reason I would add to that. It's also a dynamic

 

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Rob Ferguson: It's never done so to speak. It's constantly changing and evolving in. That's a hard concept for a lot of whether your family business or not just, just to implement succession planning at the board level or the organizational level it's it's it's difficult work.

 

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Rob Ferguson: And quite honestly, I don't think leaders business leaders, think about succession plan as strategy.

 

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Rob Ferguson: But that's what it is. It's nothing more than part of the human element, the leadership element of your business strategy.

 

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Rob Ferguson: And if you subscribe to the fact that businesses are living organism, then you have, you have to be compelled to make succession planning strategy top of your list as the leader. And the other reason just to build on maybe Michael where you're going a little bit is

 

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Rob Ferguson: Leaders tend to

 

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Rob Ferguson: Have a propensity to put their identity and their role.

 

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Rob Ferguson: Okay and so

 

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Rob Ferguson: A leader of a business of a family business. He's, he's built that organization up maybe he was the first gender second gen, but he's built that business up. He has a success model like Alison talked about

 

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Rob Ferguson: That doesn't mean that's going to be the success model for the future and that business leader might actually understand that, but the the the big objection. I get to from the business leaders, but what am I gonna do when I'm no longer here. And who am I gonna be. And so there's this identity.

 

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Rob Ferguson: Conflict, that's not true. But it's, it becomes true because that leader keeps telling himself over and over and over. Oh, I'm the founder of the the MO business. And so if I'm no longer the founder CEO, then I'm nobody. And I have no purpose or role. And so that's really

 

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Rob Ferguson: The primary objections that I deal with in succession.

 

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Michael Palumbos: I want to, I want to take a detour on what you just said there. I'm not a detour. But I just want to add to that.

 

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Michael Palumbos: Wasn't in our programming as we as we put this together. But think about what you just said the owners identity. Oftentimes, not always, you know, it's a percentage of the time is built around that business.

 

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Michael Palumbos: And one of the things that that I have seen and that I've that

 

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Michael Palumbos: Scary is right up at that moment, I'm two years from that transition. We've were making payments, the things are happening and and without having the conversations about who am I going to be after this

 

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Michael Palumbos: decisions get made that they wouldn't have done five years ago, the same way.

 

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Michael Palumbos: And so things like starting another company that there's no way that that company will ever be profitable and if they would have never bought that company, they never would have done any of that work. Otherwise, but there because they don't have that clear path to where I'm going. Right.

 

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Michael Palumbos: Decision making its quality. So just a cautionary piece. It's not, it's not everybody we don't see it every single time. But, I'm, I'm working with a case right now that's the case, and it's

 

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Michael Palumbos: I can definitely see that that person is nervous and we tried to have these conversations. It was just a conversation that they didn't want to have you follow me and now it's looked it's it's coming out.

 

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Rob Ferguson: Yeah, because let me just finish that thought is, is because succession planning on happened because of fear.

 

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Rob Ferguson: Right, because I'm afraid. And not only is it hard, but I'm also fearful. I'm going to lose control.

 

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Rob Ferguson: Whoever my successor is going to be may not be the best qualified may not be the most equipped, or I don't have anybody in my family. So there's if they're not in my family and they can't even exist in this world. So there's all of those

 

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Rob Ferguson: Internal conversations that happen with that leader that aren't true. But for them, it becomes truth. And so as a trusted advisor.

 

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Rob Ferguson: You have to build that rapport and relationship to be able to peel the onion back somewhat to get the succession planning started and open to

 

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Right.

 

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Michael Palumbos: Allison when when when we were talking, the three of us, you know, during the show prep. One of the things that came out was that that really important question.

 

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Michael Palumbos: That every family business has to ask themselves, and they must answer you mind sharing that that question. And why is that so important.

 

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alison moss: So it's really important and it's what I learned from Rob. So, Rob, tell us the question.

 

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Rob Ferguson: Okay, sure. So it's, it's a two part question. And I always ask it before I even begin the process is, do you want to be a family first business or a business first family.

 

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Rob Ferguson: And it's interesting how the react responses come some come within three seconds, two seconds and they they happen to be value centric right

 

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Rob Ferguson: Others look at me like I have three years. What in the world did you just asked me, and what does that have to deal with my problem that I am right now today. And then as I work them through the question they become to get them to be contemplated

 

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Rob Ferguson: It's, it's a very challenging exercise to get the family stakeholders involved in that business to work together on consensually

 

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Rob Ferguson: Coming up to, well, who are we and and and that becomes then once that declaration is made that becomes the strategic cornerstone, so to speak, that all other decisions going for the succession plan operations, whatever it all centers around that cornerstone. Great.

 

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Michael Palumbos: Allison. Would you mind just walk us through an example or, you know, some families. What they do that their family focused versus those that are business focused if he

 

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alison moss: Yeah.

 

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Michael Palumbos: The Tale of Two businesses.

 

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alison moss: Well, I just this morning was meeting with a family member of a family on business and we were talking about some things that had been funneled through the staff at the company that really was for their household

 

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alison moss: financial needs and we've been talking about setting up a family office that will address the personal items and and really extracting that from the day to day CFO and

 

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alison moss: admin staff at the company, why because they're a business first family and they need to

 

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alison moss: Really put some boundaries and barriers in as to what's going because when one child goes to the

 

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alison moss: CFO to get something or goes to the lawn service or goes to get gas at the pump. You know, you really have to put in some boundaries.

 

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alison moss: And say, well, this is the other company. I asked, it's there for company. We have people getting bonuses off of the revenues that these are making you cannot cloud that for personal use. So there's one example.

 

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alison moss: For my kids a little thing, but it can be a big thing.

 

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Yeah.

 

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Michael Palumbos: Yeah, I mean, the flip of that you know is the. Yeah, I've heard it stated this way. Are you a lifestyle business or an equity business right

 

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Michael Palumbos: Yeah chime in. So when you when you're looking at these Pete, you know, at the at the businesses, it's easy to see that, you know, when I have a 1200 dollar you know per month.

 

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Michael Palumbos: Carly's on my navigator that I'm running through the business versus I'm just driving the Ford truck like everybody else in the business. It's different.

 

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alison moss: So I'm going to get multiple beneficiaries and you had mentioned earlier about those who are active in the business and those who are not

 

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alison moss: Then you really can stir up some challenges on the relationship side because things really aren't being even an equal and up in the up and up on the financial side.

 

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Michael Palumbos: And in either of you can answer this. But when you know when you're in the first or the second generation, you might be able to pull that off.

 

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alison moss: And in my salute Lee.

 

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Michael Palumbos: Because, because we all grew up in the same house or it's all the money is all of ours me my, you know, my wife and I are, you know, my spouse and I

 

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Michael Palumbos: But when you get to that cousin generation. When you go to that third generation that's one of the things that really starts to get messy well mom and dad or mom and our uncle did it this way.

 

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Michael Palumbos: Why can't we. And now, how do you pick if you especially if you got seven cars cousins from different houses and different values, how do you decide who gets what special service run through the business right

 

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Rob Ferguson: Well that's, that's why it gets really difficult when you start commingling personal business but it happens all the time. And when you get to that cousin level that third generation.

 

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Rob Ferguson: It's really important that

 

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Rob Ferguson: You go back to our we have family first business or business first family and for business. First, we don't need to be equal and our transition of the business or the the wealth.

 

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Rob Ferguson: Or even leadership roles. We just need to be equitable right and so you have to take that kind of mindset on to help through the, the non managing owners maybe non voting owners and rather just it's more about

 

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Rob Ferguson: Be being balanced. I think in in succession planning have one client I had they the world and their business. This was the hundred year old business. It was failing.

 

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Rob Ferguson: They inherited their job positions. So because their grandfather was the vice president of sales and their father was the vice president sales.

 

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Rob Ferguson: That then enabled or entitled The fifth generation to be vice president sales who wasn't qualified at all.

 

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Rob Ferguson: And that's what, that's where those are the issues that as you mentioned, Michael, you get deeper into the generation without proper guidance without great advice and bottles out there that are successful, it really does become very disastrous quickly.

 

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Michael Palumbos: So when we talk about, you know, starting to design that succession plan, whether it's the first conversation or the third

 

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Michael Palumbos: A lot of times you know the the current generation.

 

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Michael Palumbos: You know, they start looking for advisors, but may not be the most critical people to lead the succession planning process based on what we talked about, you know, they may not be who you think and

 

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Michael Palumbos: expand on that a little bit that that idea. He Allison.

 

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alison moss: Yeah, so I will often

 

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alison moss: Have introductory conversations with a patriarch is like, well, we've got to come up with a succession plan, like, well, you really don't the people who are going to be here need to have ownership in this plan because a succession plan.

 

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alison moss: If you've got one person or a couple people dictating what successive generations are going to do and how they're going to do it. That's how you end up with a scenario. Rob just described. That makes no sense.

 

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alison moss: If you want the business if the if the goal is to have the business succeed or at least have people there who are qualified

 

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alison moss: Then you need to have those folks at the table family non family who are the players.

 

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alison moss: Just like you were saying, Michael, the beginning you earned out your dad you bought out your dad every succession plan needs to have an earn out

 

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alison moss: And while it might not be a financial transaction back to the patriarch, in fact, you usually don't want that. You can still earn it.

 

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alison moss: And we're constantly talking with our families about who should be doing this, not, who do you

 

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alison moss: Want because they favor you are not. Who was this special grandkid at the table. Mm hmm. Let's put our business hats on. And let's talk about

 

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alison moss: How's this going to work. And if you don't know the answer. Let's find someone who does, and let's get them to the table on this, because otherwise I'm I feel like really good intentions, end up with a lot of unintended consequences and the patriarchs not here to sort it out.

 

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Michael Palumbos: Agreed. That's great. Thank you Rob

 

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Rob Ferguson: I totally agree with that and

 

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Rob Ferguson: I think there are unintended consequences when you don't have the the right advisor doing your succession planning. In fact, it's really hard to have just one advisor to do this.

 

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Rob Ferguson: I believe that there's three at least three conversations going on at once when the patriarch or the second gen third gen comes to one of us and says I need a succession plan.

 

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Rob Ferguson: They're thinking about succession of wealth, they're thinking about succession of leadership, they're thinking about succession of business.

 

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Rob Ferguson: So if, if, if you go if the the individual, the family member goes to their trusted advisor, the Attorney

 

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Rob Ferguson: Well, they're going to be coming at it from one perspective. Their, their area of knowledge and expertise or if they only they'll see their, their estate planner their wealth manager, it's only going to be from one perspective brother CPA. So I really believe it's important that families.

 

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Rob Ferguson: Interview and select an advisory team and Allison. I've been on these advisory team before and

 

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Rob Ferguson: It just depends, you know, that's kind of my role is a generalist is I quarterback it but we bring experts in expert advisors to get the best well planned the best business succession plan and the best leadership succession plan. Yeah.

 

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Michael Palumbos: And what you're saying fits you know kind of the philosophy that we have is that designing a succession plan is a two step process right it's you got to do the people part first.

 

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Michael Palumbos: And that's Rob. That's where you, where you spend an awful lot of time and Allison. You do is you do as well. But it's also then it's the

 

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Michael Palumbos: Then you got to get to the technical part. Where are the, where are the taxes, where the, where the documents you know where where the you know the investments going in for

 

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Michael Palumbos: Sale as part of this, whether it's between generations or not. So it's a really, you know, the people have to come first, because we got to be thinking about, you know,

 

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Michael Palumbos: The generation that may be stepping away what's how's it the impact on employees, what's the impact on leadership, what's the impact on

 

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Michael Palumbos: You know the siblings and Alan part of the business. You know, when you start to put all of those pieces together. If we don't address each of those people pieces the technical stuff doesn't matter, doesn't it.

 

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Rob Ferguson: That's also the third piece. Michael would be the the business, the operations. Because what what towards succession planning. Is this the the the patriarchs success model that got them there. Allison said this at the very beginning is not going to get them there in the future.

 

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Rob Ferguson: So that has to be addressed and and the Patriot has to understand that there's a time to let go and let the next generation put their

 

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Rob Ferguson: Their fingerprints on on the business Michael Allison. You both have experienced this. And you know exactly what I'm talking about.

 

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Rob Ferguson: And that is that other third element of the conversation that a lot of times, nobody wants to deal with because it's too confrontational before Thanksgiving dinner right

 

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alison moss: It is and you know I can't tell you how many times, someone would come to me and say, Oh, you're working for your father. Oh, those are some big shoes to fill. I wonder if you're gonna be able to do it.

 

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alison moss: And I'm like, first of all, he was Allen Edmonds and I were Stuart Weitzman, so there's no shoe filling happening here. Second of all,

 

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alison moss: I'm me. I'm going to do what I can do. So if you come at this expecting me to replicate. Pol. You will be disappointed.

 

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alison moss: And I will see beneficiaries, always having or next gens always having the strength to stand up and say, whoa, whoa, whoa.

 

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alison moss: What do you mean replicate. What do you mean continue on. I have something fresh to bring to the table, new to bring to the table. But I will say it is very rare Rob was an exception for me personally, years ago, it was rare for anybody to come to me and want to know what I had to say.

 

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alison moss: It was really about how are you going to continue what someone else has been doing. And I think that is unfair.

 

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alison moss: To all parties involved, it's not realistic. There's a lot of crossover I've learned and benefited from my father's experience tremendously.

 

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alison moss: And I honor that. But I don't let it inhibit me and I can see people I've interacted with folks who get inhibited, they get handicapped.

 

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alison moss: By that societal pressure of repeating what's happened or sustaining it but really don't. We all know that had businesses, you have to be ever evolving in order to thrive. So it's counterintuitive and yet.

 

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alison moss: As a society do to

 

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Rob Ferguson: Families and to maybe advocate for the the

 

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Rob Ferguson: The first gen or the founding Jana, the sitting, leading gentlemen advocate, there it is very difficult to see your sibling different

 

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Rob Ferguson: Than your son or daughter, they've known you ever since you were born and they know what your experiences are so they relate to you is that

 

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Rob Ferguson: Cute brownie that went on a camping trip. Right. It's hard for them to say, oh, wow, you can actually take over this enterprise and do. You're going to do something better or different than I've ever done. And, and so there has to be that

 

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Rob Ferguson: That atmosphere of empathy and understanding. I get called today more from the second generation that I do from the sitting generation on hey I need a succession plan. I need you to build it and then just let me have something I can show in front of my Father's face or my to

 

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Rob Ferguson: Write that they just doesn't work. And, and so we have to have empathy for all generations everybody involved. That's why the team is important. That's why your advisory group is important.

 

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Rob Ferguson: And it's hard work. Allison said it. It's very hard work and it's very dynamic because as you start peeling it back.

 

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Rob Ferguson: As more than likely we're going to find out. Well, I just never thought my I would ever have a daughter running my business. I thought it was always going to be one of my sons

 

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Rob Ferguson: Well, there you go, then who's the best qualified lambs, a big two out of two of my daughters are the best qualified. So then you break down all these dreams and you have to work it through. So it's not

 

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Rob Ferguson: wrong or bad better. Helping. Helping all generations work through the scenarios and then once that gets

 

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Rob Ferguson: Scenario gets declared in that family first or business first declaration from there to hear your point, Michael. Now you can work on the technical side you can work on the business side.

 

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alison moss: Yeah, that dance between the technical and the people is ongoing. I remember when there was a

 

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alison moss: Part of this process that my father and I were working on

 

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alison moss: And I could tell something wasn't comfortable for him, but I, I couldn't figure out what it was. And so I went and talked to him, I said, with, you know, what is it,

 

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alison moss: And he said, I didn't realize how hard this would be for me. It's all right, it's all good there. So, but I talk about identity. Right. This

 

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alison moss: That was a piece really didn't have anything to do with me, but it was it was presenting itself during the process. And so while I experienced that in our own transition I see it often

 

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alison moss: And I talk to the next. Gens. And so you know what you might be frustrated that things aren't going quickly and that for things aren't happening, the way you think they should

 

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alison moss: But the more patience and empathy, you have for your parent, the better. This will go on the familial side of things you can all still enjoy getting together and I i went slower.

 

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alison moss: Then some people were encouraging me to do, and our transition because I wanted to respect the timetable that was my father's that was more important to me than anything else. And I see that the families who

 

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alison moss: Stay attuned and kind of keep radar on that and go in, anticipating that it will be difficult.

 

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alison moss: Have better outcomes as a family and less moms brokenhearted and torn between fathers and sons or kids and it just, it can eat people up, and it doesn't have to

 

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alison moss: If you it's easier if you go in with the expectation that one. It's hard. And it takes a lot of time. Yeah.

 

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Michael Palumbos: You know what, it goes back to what we were talking about before, where it's that team. You need to make sure that somebody on the team is taking care of the people.

 

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Michael Palumbos: And somebody's thinking about the technical and if you and if that people person is very often, it's the people person that can

 

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Michael Palumbos: Filter in some of the technical stuff. Rarely, but once in a while. And like I found some attorneys that do the people part really well through the years. And that's more rare.

 

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alison moss: Where you find somebody that yeah, or an accountant.

 

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Michael Palumbos: And it's not. It's just the way that the industry is. But when you find it. It's nice. The other thing that popped out to me is, we talk about how the current generation, the leading generation is thinking

 

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Michael Palumbos: And, you know, Rob, what is we started we talked about the infinite game. And as you know, if we can get that infinite mindset.

 

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Michael Palumbos: About the business. We also have to think about it in terms of how we interact with the business and I, you know, when in my first book I talked about

 

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Michael Palumbos: The parent transition and that's that, you know, somewhere between zero, you know, between zero and 12 or 15 or some kids at 25 you must parent them, you need to tell them no. You need to tell them you know

 

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Michael Palumbos: what the boundaries are and set those pieces up somewhere between, you know, a certain age, and it's different for every kid, you need to transition to that coaching ability

 

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Michael Palumbos: And let them go and make mistakes and let them do it on their own way and feel those things in the parents that don't ever make that first transition

 

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Michael Palumbos: Will very rarely make that next transition which is I need to start thinking of you as my colleague

 

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Michael Palumbos: We're, you know, you're, you're an adult. And so even though there may be a generation gap and we respect and all of those things have to be accounted for.

 

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Michael Palumbos: If you're going to be the one writing the check to me for this business. I better be thinking about, you know, or however that transition is going, you're going to be running the business. I need to be thinking about you as colleagues and

 

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Michael Palumbos: My father. This year, there was the first time and I love my dad and we have great conversations about this. I'm always excited to talk to him about what's going on in the business.

 

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Michael Palumbos: But we had my parents on one of the episodes with Courtney pulling and you made both know down but so Courtney is one of the one of the best, you know, family business coaches out, you know, in the country.

 

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Michael Palumbos: And Courtney did a live. We called it family business unscripted, and we were talking about mom and dad's a state plan live in the recording.

 

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Michael Palumbos: And, you know, one of the things that you know that happened, you know, the in whether it was from that recording or something.

 

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Michael Palumbos: And it might have been a conversation we had a couple weeks later, my dad said, I'd never done it the way that you're doing it. And he goes and he goes, you're just so

 

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Michael Palumbos: Persistent in your thinking in your imagination to bring this together. He goes, You didn't even have a podcast, you know, a couple of months ago and now you have this podcast. It's listened all around the world. It's just bizarre to me and I couldn't even imagine.

 

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Michael Palumbos: And then that goes right back to what we're talking about is that it's hard for them to see the business done differently. They did it for 40 years or 30 years or whatever the case may be and just acknowledging that now listen for you to go and talk to your dad kudos

 

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Michael Palumbos: That's that's big.

 

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Michael Palumbos: Idea that look at any other examples of, you know, transitions done well transitions not done. Well, what are some of those other pieces. There are other stories that you know you might

 

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Michael Palumbos: Might be willing to share that come to your mind where you're like, You know what, this one's. This one's worth it. You know, this one's worth worth sharing and

 

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Rob Ferguson: By him and talked about

 

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Rob Ferguson: Selling the business as part of the succession plan.

 

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Rob Ferguson: And

 

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Rob Ferguson: Sometimes, that is the only

 

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Rob Ferguson: Way and sometimes that situation is, you know, it's almost compelled to happen where it's really challenging, I think, is when

 

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Rob Ferguson: It is an option, but it's like when you we list out the options, it's the last one I'm never gonna do this, I'm never going to sell this business.

 

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Rob Ferguson: And Allison and I had a a joint client down in Florida that the two brother in law's that was kind of their viewpoint, they

 

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Rob Ferguson: They got their business and they were never, ever, ever going to sell it and they had this whole plan. We set up a wonderful board of directors and providing corporate governance to enable

 

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Rob Ferguson: next generations. The next two to three generations able to be shareholders but not operating. Great. We really happy. But my caveat was is that you need to be prepared someday.

 

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Rob Ferguson: Some drunken sailor is going to come wandering by a pocketful of money and going to offer you that money for your business. Never happened never will. Well, it happened.

 

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Rob Ferguson: And they did sell the business, but it was a very difficult decision extremely difficult for them to get to. But now when I

 

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Rob Ferguson: Many years later I talked to him. They say it was the best decision ever got. So I think pitfalls is is what's the old adage. Never say never.

 

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Rob Ferguson: Always be open, right, just because it's dynamic succession planning exit strategies are dynamic and they're they're related to various trigger events and what we advisors can do is just help these families and these business leaders, think about trigger events, think about

 

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Rob Ferguson: Milestones or issues and come up with various scenarios. So when they do enter into a scenario, they can pull that out of their top desk drawer and go okay now we have the beginning of a pleasure.

 

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alison moss: And I would add to that the the difference that I've seen consistently between families who are thriving not perfect but thriving.

 

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alison moss: In multiple generations and those who are not is the amount of transparency that exists if you are providing information in a digestible way, not just throwing a bunch of numbers at folks. But if you're communicating what's happening and what is reasonable to expect.

 

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alison moss: Then you minimize or even eliminate the the chatter. The assumptions. The feistiness because that comes when they have nothing else to go from

 

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alison moss: But if you've given them good information. There's nothing to squabble over, you cannot like it you can say someone's not doing a good job, but it's based off of fact.

 

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alison moss: Not assumptions or opinion that doesn't have anything to substantiate it and if it's based off the fact you can act in a certain way. If it's not, then you're just doing just whining.

 

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alison moss: And family businesses thrive when decisions are made off of data. And when that data is available for people to make the decisions and now the emotion is driving it a business data driven decisions being made and

 

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alison moss: That that has been in my opinion. Probably the biggest difference between the families who have successfully navigated across multiple generations and those who have it.

 

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Michael Palumbos: Right, yeah, transparency and communication. I think would be those two pieces that transparency piece we know what happens.

 

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Michael Palumbos: For people and just the. Think of the psychology behind this is that we are wired for story, our brains just think story. And if if there's no end of that story, or if there's a missing link in that story we're going to fill in the gap.

 

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Michael Palumbos: Dangerous and that can be really dangerous to fill in that gap. I'm

 

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Rob Ferguson: Just so just to add to that, I agree. The third one is long term thinking, yeah. I mean, obviously that you, the family businesses that I'm involved with

 

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Rob Ferguson: That are wildly successful thriving are those that think and segments of

 

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Rob Ferguson: You know, decades, they been in business clients of mine. Hey, they can't even think three years out, much less maybe even a year out, but those that are thriving they plan in increments of decades, and those are the ones who are doing exceedingly well

 

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Michael Palumbos: You know, one of the things that I did in the last four years, was to get certified as a growth strategy coach.

 

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Michael Palumbos: Because what I kept seeing over and over again in this succession piece from my perspective.

 

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Michael Palumbos: Even though I was dealing with the people part I wasn't dealing with the business part rod to your point earlier.

 

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Michael Palumbos: And so what that allowed allowed us to do is who's going to be running this, how is it going to be run. What is the strategy.

 

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Michael Palumbos: Going forward, and when you can mesh those pieces together in the succession plan. I do really, you know, that just kind of popped. For me, as we were talking right there, that, that, that extra piece has has really been helpful.

 

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Michael Palumbos: We have the last note on here. I think we might have covered it at some levels, but maybe we just get a little specific a new idea for creating

 

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Michael Palumbos: An endurance succession plan that most family businesses should utilize did we cover that already, or is there something you want to add there.

 

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Michael Palumbos: And maybe we weren't specific I think what we were talking about is how the children or the next gen should be designing that maybe we did that together, maybe, and this put that yeah yeah yeah

 

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alison moss: I think thinking in this stock in the stock market and and manager analysis when they're looking for companies to invest in

 

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alison moss: A lot of money managers do what they call a bottoms up approach and some do a top down approach and I found that that translates well into family succession planning.

 

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alison moss: To consider a bottoms up approach, and if you if you don't, if the patriarch or matriarch says I can't do that. Well, then you might not be ready.

 

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alison moss: To have this, go to the next generation. You might need to be more focused on a third party sale. Yes. If you can't bring them to the table. There's some there's the focus needs to shift and

 

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alison moss: like Rob said sometimes it's the best for everybody to sell the business and go from there. And I had one family member come to me and said, well, this is all in our shoulders and if we fail.

 

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alison moss: You know, everybody says we're going to fail. And then we're gonna fail, and this is this is gonna work. I said, whoa, whoa. How is selling the business failure.

 

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alison moss: Running it into the ground that's failure.

 

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Michael Palumbos: You know what, that's a really interesting point, go back to that the data that were given. And it's shared, is that what is it 30% make it to the to the second generation and only 12% make it to the third. I think that's the number of 3% make it to the fourth.

 

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Michael Palumbos: And everybody talks about it in terms of failure. And it's just that they fail to exist. I don't think selling a business that Grampa started with nothing and selling it for $50 million could be considered failure.

 

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alison moss: And yes, I had people telling me all the time. Well, looks like got 30% chance of succeeding at this horrific thing to tell somebody.

 

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alison moss: Right. Well, actually I think I've done some things to kind of shorten that gap but you know. Guess what time will tell.

 

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alison moss: I think in and there are some flaws with those studies that are so broadly shared but not quantified.

 

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alison moss: And I often have asked people, when they say their fear of failure, like, Well, what is failure to you, not what you think everybody else is going to deem to be failure, but what do you think is failure and

 

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alison moss: There, there again on the people side just call it identify what it is you want and then work with your advisors to get there and try and try and block out the noise of these statistics or of the

 

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alison moss: Society's opinions and do what works for you. You're the one living with it and pull in the resources you need and manage it to help you manage expectations and have that third party.

 

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alison moss: I on this with a perspective, that's not emotionally driven people said to me, how do you do this, like, Well, I don't have to go to Thanksgiving dinner with them. That's

 

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alison moss: A lot easier when

 

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alison moss: There's not an emotionally charged triggers that you're also trying to navigate. And that's what our families are navigating it's exhausting. We can come in and not have to know to deal with that. INSTEAD COULD SEE IT FOR THE NUMBERS do yes for the individual

 

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alison moss: And so it's it's just so worth it. It helps make it less painful and helps you open up to things you probably wouldn't have seen otherwise.

 

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Rob Ferguson: Yeah, I'd like to add that the numbers and the facts are primarily looking back right but succession planning is looking forward. And so to Allison's point

 

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Rob Ferguson: We we've got to engage the family stakeholders as early in the process as possible the patriarchs have a responsibility to also clear miss that. The second or third generation may have

 

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Rob Ferguson: So the second or third generation might believe that selling the business, you know, would be terrible grandfather is going to come back and haunt me if I ever do that.

 

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Rob Ferguson: Well, our job as leaders is to work with the multiple generations in the business on creating that future

 

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Rob Ferguson: And and getting rid of those myths and that begins to that it's not fat, necessarily, but it becomes a reality about the future and that you need to put that into your succession planning, not only

 

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Rob Ferguson: Data, which is is sound and important, but also we should try to shoot down as many family lore and miss that we all dream up and so

 

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Rob Ferguson: I agree with Allison when we do succession planning, we, we start bottom up interviewing all the families figure, but we also go top down right we find out where we're we're misaligned.

 

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Rob Ferguson: And then that's where we go to work and most of the time when we're misaligned greatly where they were not ready.

 

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Rob Ferguson: And so that that will just be throwing the family will throw money away, trying to get advisory help when it's just not worth it. But I know for a fact Alison

 

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Rob Ferguson: Has said no. Too many clients as I have to that we're just not ready yet. Here's some steps you can take to try to get ready.

 

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Rob Ferguson: But it's so important to be thinking forward and succession planning is is out in the future. It's, it's not in reality, but yet we do our succession planning from a point of

 

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Rob Ferguson: Historical facts or a point of current reality and that's that makes it challenging if you can't break through that.

 

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Michael Palumbos: Agreed. Well, we're six minutes away from the top of the hour.

 

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Michael Palumbos: If anyone had any questions, please feel free to throw a hand up for Rob Ellison or myself happy to to do that just pause for three seconds, so that the week of my the person that does the editing can

 

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Michael Palumbos: And without seeing any hands coming up, then

 

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Michael Palumbos: What I'd like to do is just talk about for a couple of minutes, there's, you know, some creative ways and methods of doing success succession planning. You know, I think we counted one time that there's probably 21 different ways to pass the business.

 

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Michael Palumbos: And you're not, you know, you're not going to use all of them. And this is why you know succession planning needs someone like Rob and Allison and myself to like to bring these these pieces together.

 

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Michael Palumbos: But you know in your time of doing things. What were some of the creative ways that you saw somebody utilize just the passing that the asset itself when were some of the ways that you that you would say we're pretty creative

 

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alison moss: Well, we always like to look for opportunities to reduce a state tax.

 

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alison moss: And be creative in that regard. So there's a technical creativity that

 

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alison moss: I can get really nerdy on it's it's really neat to try and I love puzzles. I love how can we slice and dice this a little differently to work for what you have going on and

 

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alison moss: One family.

 

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alison moss: This is something I'm hearing more and more of one family was struggling with the idea of their two children, breaking the estate evenly between the two.

 

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alison moss: Because the third generation was so disproportionate at one on this side and five on this side know like we don't want one grandchild to win the lottery and the other five to wonder why they weren't treated the same.

 

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alison moss: So we approached it

 

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alison moss: And started with the third generation.

 

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alison moss: And in this family that was an option. It's not for everybody, but I love the care and concern of the grandmother and I loved working with them to find something that felt really good and

 

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alison moss: Was was really respectful of how she wanted them to think of her

 

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alison moss: And so that was something that was unique, but I said that, like, three other people ask something along those lines. So maybe it's the new trend as we have so many different families and

 

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alison moss: Numbers are are so different, but I loved that she spoke up and shared with she wanted to be remembered for and how she wanted her children to feel when they thought of them and and that drove a lot of the planning.

 

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Michael Palumbos: Back to the people side of things.

 

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Indeed,

 

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Michael Palumbos: All right, Rob. Any Anything come to mind.

 

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Rob Ferguson: Yeah, just very quickly.

 

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Rob Ferguson: A client of mine, they're low over 70 years in business. The second generation are

 

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Rob Ferguson: Two two cousins and they realized that very early on in their career that they needed a more robust succession plan.

 

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Rob Ferguson: So when their children were probably around high school age they developed a criteria, a checklist, so to speak, of what what the next generation. If you want to come in to the business. What, what qualifies you to come into the business.

 

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Rob Ferguson: That's kind of a best practice, but they went a step further and said, now if you want to become a candidate.

 

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Rob Ferguson: Into one of our executive leadership roles. What's the criteria.

 

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Rob Ferguson: Then they took it a step further and said, now if you want to replace one of us. If you want to be considered in the ultimate succession.

 

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Rob Ferguson: Understand, you're going to be competing with your cousins and with external candidates. They said that from the very beginning. And they repeated it the drip, drip, drip,

 

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Rob Ferguson: And they had that criteria and we are now, I don't know, probably there 15 years into it and it is just

 

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Rob Ferguson: For, you know, it has just been marvelous and this is a big company thousands of employees and they've just done a great job. And in the end, the second generation patriarchs.

 

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Rob Ferguson: They actually declared the date that they're going to retire. So they made it mandatory on themselves a decade forward of when their compulsory retirement date be

 

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Rob Ferguson: Wasn't easier for them. In fact, I had one of the found the, the second generation come speak about the difficulty of transition, but that to me. It was very unique. It's very

 

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Rob Ferguson: Long thinking and I just believe if everybody can do that start thinking in increments of decades start talking to family members as early as possible and always Never Say Never and be open to all possibilities. Great.

 

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Michael Palumbos: If people wanted to reach out and contact either one of you. Are you both on LinkedIn, easily accessible.

 

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Michael Palumbos: Yes.

 

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alison moss: That would be certainly

 

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Michael Palumbos: If you want to tell us your website's real quick.

 

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Laurie Irish Jones: Mary Jo.

 

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alison moss: N minus

 

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alison moss: Five partners com

 

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alison moss: Or empowering beneficiaries.com either way.

 

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Michael Palumbos: Got it.

 

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Rob Ferguson: And Rob, isn't it Ferguson interest com perfect

 

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Michael Palumbos: Well, I want to thank you both for joining us today. This has been a really fun show

 

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Michael Palumbos: I hope that everybody got a lot out of this that we covered a lot of materials and also certain the three of us could sit and talk for another three hours and trade stories and whatnot. So I really enjoyed our time together today.

 

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Michael Palumbos: Again, this is the family biz show. My name is Michael Columbus from family wealth and legacy in Rochester, New York. And if Allison Rob or myself can help you and your family business in any way, do not hesitate to reach out to us.

 

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Michael Palumbos: We love doing what we do and working with family owned businesses, everyone. Have a great day and enjoy the rest of the week.

 

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alison moss: Merry Christmas. Thank you. Thank you.

 

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Michael Palumbos: And I'm gonna stop.

If you’re a family business or a family business consultant and want to be on the show, share your story and help other family businesses, send us an email to producer@thefamilybizshow.com or fill out a contact form here!

*not affiliated with Lincoln Financial Advisors Corp.

Michael Palumbos is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Family Wealth & Legacy, LLC is not an affiliate of Lincoln Financial Advisors Corp. Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice. You may want to consult a legal or tax advisor regarding any legal or tax information as it relates to your personal circumstances.

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