Podcast: A Guide to Family Business Transitions

By Noah Rosenfarb
Published: October 13, 2014 | Last updated: March 21, 2024
Key Takeaways

Business succession can be a very stressful process for families. In this podcast, an industry pioneer discusses some fundamental ways for your succession to be a success.


In this podcast, Ian Campbell, author of “50 Hurdles: Business Transition Simplified,” discusses:

  • Barriers to entry in terms of generational transition;
  • The gap between experience-based advice and soft-side advice;
  • Importance of pro-active planning and autonomy of business owners;
  • The ideal role of a transition advisor;
  • Synergies and strategic investors;
  • How generational transitions have changed over time; and
  • Effect of globalization on succession planning.

About the Guest

Ian R. Campbell has been at the forefront of Canadian business valuation for more than 40 years and is widely recognized as one of Canada’s leading business valuation consultants. Ian authored “50 Hurdles: Business Transition Simplified,” a book that focuses on family business transition differently than most other business transition (more commonly called succession) literature. Ian also introduced and The Business Transition Counsel Newsletter to the Internet, a website and newsletter that offers relevant information to family business owners and owners of non-family private companies.


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Read the Full Transcript Here:

Noah Rosenfarb: Hello and welcome. It’s Noah Rosenfarb, the author of Exit: Healthy Wealthy and Wise from Freedom Business Advisors and today our great guest is Ian Campbell. He is one of Canada’s best known business valuation experts. He has been advising business owners on valuation and transition planning for 45 years. He recently put together his book called 50 Hurdles – Business Transition Simplified. Ian, I want to thank you for coming on the show today and welcome you.

Ian Campbell: Well Noah, thank you very much for having me on the show.


Noah Rosenfarb: Why don’t we start by telling me a little bit about the book, how did you get the idea to write it, and what made you invest the time and effort to put it out into the world?

Ian Campbell: Well, as you said, my background has largely been giving business valuation advice over a 45-year period now principally in Canada but often with multinational involvement. I give advice in many disputes involving families that were working on generational transition. While I didn’t hold myself out to be a transition expert per se, I was involved with a great deal and observed a great deal of good things and bad things in the transitions that I saw.

In any event, about a year and a half or so ago, because I’m now retired from my practice although I still do some high end consulting work, I was invited to a transition seminar. There were five speakers. I went largely out of curiosity and interest. I walked out shaking my head because what I heard was a whole lot of soft side debate and discussion by these five people in circumstances where what they were saying was not what I experienced as a practical matter in my practice.

From there, when I got back to my desk, I thought about it and I thought, “I better read more of this transitional literature than I have to date,” and I began doing that. I quickly realized that most people who write about transition think about it somewhat differently or appear to think about it somewhat differently at least than I do. So I sat down with a blank piece of paper and I listed out and then subsequently organized by topic the hurdles that I know of and have experienced and observed that for some business families are barriers to entry in terms of generational transition.

I then spent quite a long time and quite a difficult time frankly writing 50 Hurdles as a book and 50 Hurdles is what I intend to be and I would describe as a systematic road map and a reference that identifies and discusses hard transition issues. That’s generally the background as to why I did it and I’ve done it. I’m getting very positive reviews from the book and where it takes me from here, I’m not entirely sure.

Noah Rosenfarb: Explain a little bit more about what me might call the technical and quantitative issues versus the qualitative and communication style issues. Where do you think this cottage industry, as we both refer to it, is going and where it might be going – in the wrong direction or in the right direction?

Ian Campbell: Well that’s a question I want to think a little bit about before quickly responding. First I would say that after this book came out, which I really got the first copies about three months ago, I started to get some very interesting feedback on the book that causes me to have confirmation that the great deal of the literature and I think the advice in this area is what I call soft side advice.

One of the leading recognized transition experts in Canada was a contributor to the book. I didn’t know him a year and a half ago, found him out, he knew who I was. He was very helpful and when I sent him the first draft of the book, he called me and said, “Wow, chapter four is off the charts.” He said, “Nobody in the transition business has ever raised this before.”

I didn’t believe him, frankly, because I’m not sure whether it ends up being chapter four or not, but I included in an early chapter in the book what I call the First Business Transition Fundamental, and that business transition fundamental is you better know and continually review and be satisfied that your business is going to be viable as a going concern 7-10 years out because if your business is not going to be viable, you’re going to have nothing to generationally transition.

That’s only one of a series of things that I have in the book that I haven’t really seen talked about or at least not talked about in a concise way in other literature I looked at and I would be happy to talk to you about that.

Noah Rosenfarb: One of the things I would love for you to advise our listeners on is the three things that pretty much every owner should be thinking about when they are thinking about transition. I guess the first one is, “Hey, will this business be around? Is it likely to survive?” Speak a little bit more to that and maybe an example of an owner that you have advised or consulted with that either they found out that their business was unlikely to survive the next decade or they had to put in place some strategies and tactics to make sure it would survive.

Ian Campbell: Okay. You’ve asked me a number of things in there. The first thing I think you asked is what are three things that every owner should be doing now in essence to ultimately prepare for a transition, and if I’ve got that right, as I think about it, I actually think there are more than three things that would be on my list. Probably, I wouldn’t start actually with the first step, I already said it’s the first step, being the issue of whether business is going to be around is a growing concern.

The first thing that I would tell an owner if I were sitting with the owner, I suppose I am sitting with the a bunch of owners indirectly right now, is it’s really important you understand, irrespective of your age, the importance of actively thinking about transition now as opposed to postponing it. I know most people find it difficult to deal with, at least in my experience they have, and they’ve got to get past that.

The reason they have to get past that is because of what I consider to be and I spent a lot of time spending macroeconomics these days are new economic normal and what’s going on with globalization. I think those are issues particularly after the 2008 financial crisis that just weren’t as high, and didn’t need to be quite as high, on business owners’ agendas as I think they have to be today. So that is the first one. The first thing is the importance of thinking currently about transition and not postponing.

Second thing is that I think everybody who is in this thing has to understand that advisors who walk in is really you should be an advisor. I was one for forty years. You walk in, you tell people what you think they ought to do, you go back in six months, if it has been successful, you are a hero. If it hasn’t been successful you say, “Well, you didn’t exactly execute it the way I strategized it for you.”

I am a great believer in business owners thinking a lot for themselves and it is really important that those owners understand that if they are going to undertake generational transition and they are obviously two kind to transition, you can transition a business by selling it in an arm’s length transaction or you can transition the business – both its ownership and its management, which are quite different transitional things – generationally or attempt to do that.

If you go that route, generational planning has to be systematic to create the greatest possibility of success and it has to be systematic from an umbrella level so that the soft side transition advisors who basically, largely I think, say, “Communicate better and you will have a better chance at generational transition.”

My head space is not there. My head space says that a transition advisor is kind of like the top of an umbrella and underneath that umbrella are about 15 different specialty disciplines that need to be called on to properly transition business. It is not cheap, it’s very time consuming, it’s very hard work, and it has got to be something that is done almost day over day over day.

The next thing to consider is that- and I can say these things at age 72 because I am really not in practice today. I am not trying to build an advisory business. So I will tell you that they need to recognize that all transition advisors are not created equal and they got to go out and find the best of the best particularly if their business is any size.

Two other things, number one that owners in particular ought to really think hard about the pool of arm’s length retired executives and the pool of business owners who have sold, particularly relevant to their own industry obviously and seriously consider tapping that pool to be arm’s length advisors to them and their family in their business and transition process.

The second thing is to really, really, focus on how globalization is going to affect or is affecting their business. For some businesses, globalization doesn’t affect their business very much at all and it is not a big deal, but globalization and the new economic normal will affect everyone’s business because it is going to affect tax rates, it is going to affect regulation, it is going to affect any number of things and owners need to be very conscious today more so, I think, than ten years ago as to just what might impact their business both positively and negatively.

Noah Rosenfarb: So maybe share a little bit about your experience in practice as a valuation expert and the role that you played in helping business owners create value and how you see the valuators expertise coming in handy to owners that are seeking a transition.

Ian Campbell: Okay. Once again, if I were listening instead of talking here, I am cynical to begin with but if I were listening, I’d be saying, “Who is this person? All they are doing is promoting business valuation work.” So I am going to just once again say, I am not a business valuation expert looking for files. In fact, I am specifically not doing that. Hopefully, my comments can be seen with a little more objectivity than the otherwise might.

First, I have always seen, frankly, periodic independent business valuations as a form of scorecard. If you are going to play a game, you want to know whether you are winning or losing. I think periodic independent business valuations are comparatively inexpensive or should be, if they are properly structured, particularly after the first one, and I think that is something that business owners ought to think about more than they likely do.

Secondly, and this is, I think, really important is that bluntly, without continual growth in business value, business transition options become limited overtime. One of the things that I do not see too many people identifying but I have talked to both at length in 50 Hurdles and in fact I have given some graphic evidence of it is that families inherently grow in numbers. They compound as children beget children beget children.

Unless there is a serious pruning strategy adopted – that is cutting some family members out of ownership – the business just simply has to grow in order to provide ongoing liquidity opportunity through dividends and other liquidity opportunities as it goes along for capital. So it is extremely important that the business value grows overtime and that there are independent business valuations done to help monitor that.

Next point, experienced business valuation experts can help business owners learn and apply business value drivers. Now, I am a great believer in book-learned experts being differentiated from experts with operating experience. The experts with operating experience are the once that I am interested in if I am a business owner or I am interested in those with book learning valuation experts who know enough to call operating experts in to help them from time to time.

That’s the next thing, you want to get the best experts irrespective of his business valuation or anything else to do work with you. Two other things, they are not unimportant. One is, a business evaluation expert can review shareholder agreement wordings that in turn can help avoid shareholder disputes around the valuation and put some calls and sale options in the agreement.

Probably as much work early on in my valuation career was generated by badly worded shareholders agreements that did not properly structure or set out how disputes were going to be dealt with and what the proper value terms were and how they were best defined. That’s a point that’s also important. Lastly, business valuation experts ought to be able to help their clients identify if they are likely strategic purchasers for the business that would enjoy synergies post acquisition and pay more than would a buyer who did not enjoy post acquisition synergies.

That is something that curiously, Noah, that I have actually received push back from- because I thought about that at length in the book. I not only talk about the importance of strategic buyers but I list ways to determine what the synergies are and I list 25 different types of synergies and talk in general terms about how some of them might be quantified.

Well, I see transition advisors, not a whole lot, but some who have come back and said, “There are no strategic buyers or they are impossible to identify or it is impossible to quantify them so you cannot take them to account” and I just do not agree with any of that.

Noah Rosenfarb: When you are doing valuations, were you taking that into account or when you were doing valuations, or you are just saying from an owner’s standpoint, it is important to know the valuation value that is issued by the appraiser is typically not accounting for that additional strategic value that might be generated in a transaction with a strategic buyer?

Ian Campbell: Okay, two questions, in my consulting practice when I was giving opinions, I can only speak of the Canadian environment. I cannot speak to the US environment or the environment of any other jurisdiction where someone might live that might be listening. But in Canada, it has long been the case that if there are no evident strategic buyers and for example you are doing an estate planning valuation, that you typically would not take any strategic value into account in determining the value of the business.

However, for sure, you would qualify your report as an expert to say you weren’t doing that. However, if there are evident strategic purchasers, that is a whole different kettle of fish and there are evident strategic purchasers, I believe you have to at least attempt to take them into account or make a very bold statement that if the business is put into the market, it might likely fetch a price higher than the one you are attributing to it.

Noah Rosenfarb: I used to be a testifying expert on the issues related to valuation primarily in the divorce courts. In there, they had no interest in strategic buyers. It was only fair market value and in New Jersey, there was no discount for lack of marketability. It was very interesting because often times, that created an unfairness between two people that were litigating this issue so it is interesting to hear that in Canada. Maybe the standards are a little bit different.

Ian Campbell: Matrimonial law in Canada is very, I started writing this book knowing reasonable amount of both matrimonial law but I didn’t ever give valuation opinions in matrimonial matters. The reason I didn’t know do that which had to do with the way value is defined in matrimonial law in Canada. Setting that aside, I started out writing this book thinking that matrimonial law in generational transition planning was important.

I came away from writing the book thinking it wasn’t important. It was super important. I talked to some very senior judges, matrimonial lawyers in the biggest cities in Canada and couldn’t get answers that satisfied me that I could come up with anything other than as a piece of advice. Go get the best matrimonial lawyer you have if you’re doing generational transition planning and get their advice based on jurisprudences that exist at the time you’re doing it.

Noah Rosenfarb: Do you have a predisposition to thinking generational transfers are better or worse than an outright sale?

Ian Campbell: I have a predisposition to believe that generational transition may be possible or more possible from generation one to generation two, but generational transition beyond generation two, I think, becomes more and more difficult except that if a family is successful at it, and I dealt with many families that were in their third, fourth, and even sixth generation, the task becomes easier as the generations progress.

My belief as to why that is because that’s what I observed, is that their corporate governance becomes better and better and better. The bigger the business becomes, because to get to subsequent generations, I believe and observe, the businesses have to get very large and if the businesses get very large, they have more money to invest in any number of things. They tend to, at least the ones I observed, tend to start to begin to behave much like a public company and they tend to separate very well ownership from management.

I suppose what I am really saying to you is that if you can get past the second generation and the third generation and you have got a business that is growing, at least in the same way that the family numbers are growing, that you have a better and better chance to improve your corporate governance and end up with an ongoing generational family plan.

But I think getting through from generation one to generation two isn’t as hard as getting from generation two to generation three and I think once you get past generation three, it probably gets easier again.

Noah Rosenfarb: I think that goes back to what you said originally about what owners should be thinking about. When third generation businesses are operating, I would say, they are thinking regularly about long term family transition which you said at the outset, is kind of the key factor in making sure of their success and it becomes part of their operating DNA to address these issues of ownership and management, and cash flow and distributions. It is just part of the organization, would you agree?

Ian Campbell: I do absolutely agree with you, Noah. I think it’s an evolutionary process and the evolution gets easier if you can get past the tough part.

Noah Rosenfarb: Well, I think with the time that we have left, given all the years of experience that you have been working with owners and your experience writing the book, I would love it if you could share some stories that you think would be valuable to our listeners whether they are successes or failures or interesting bits of advice that you had given over the years. Just open up and tell us some of your experiences that you think would be valuable for others to know about.

Ian Campbell: Maybe the thing that I did that I am absolutely most pleased with is I got involved with a family that had a very large business. There were two brothers and four sisters who owned it and they had the son-in-law of one of the two brothers who was the CEO. They got into for reasons that were partly their issue and partly what happened in the environment, they got into financial and operating difficulty. They needed three things – they needed an equity injection, they needed to replace the family member who was the CEO, they weren’t all convinced of it, and they needed to find a new president.

I worked with them through a sequence of events that first of all helped them put some new equity in place and then most important of all, was that the brother who was the father-in-law, the CEO, came to me one morning because I was actually in their office pretty much every day for several months helping them. He said, “You know I have concluded that Sam (obviously not his real name) just can’t stay on.”

I said, “Well, if you have concluded that, here is what you ought to do, you ought to go to his office and tell him that and we will figure out where we will go from there.” Frankly, much to my surprise, he got off his chair and went and did exactly that. He came back to see me in 15 minutes and said, ” Well, now we need a new CEO.” It took a couple of months to find an arm’s length new CEO who had run a major division of a multinational.

He had equity to work with, he did know the business, he turned it all around, and that business flourished and it was sold to an arm’s length strategic buyer a few years later, before the death of any of the six siblings. That was the story of I think really good success and it was frankly a story of a fair amount of courage on the part of one of the family members. The neat thing about it was that the family members all stayed in agreement, a very rare thing to happen.

Noah Rosenfarb: Yeah. At the end of the day, was the former CEO family member satisfied with the benefits he received from the sale to a third party?

Ian Campbell: I would think he was because he was an indirect beneficiary of it and curiously, I saw him at a funeral of one of the sisters. He couldn’t have been nicer to me and told me that what had happened was what should have happened, although probably the day it happened, he didn’t think that way.

Noah Rosenfarb: Unfortunately, that’s the case most of the time. That’s wonderful because I think when owners have courage to make decisions that are uncomfortable but they know that it’s the right thing to do, that’s what leads to success. There was a great quote by the CEO of Evernote who said, “There is a difference between a difficult decision and an uncomfortable decision. In the difficult decision, we do not know what to do and in the uncomfortable decision, we know what to do, we just do not want to do it.”

I think it probably sounds like the Dad had an uncomfortable decision but he made the right choice. What else can you share with us about some of your experience? Maybe some advice that you had that was uncovered in valuation that led to unlocking a lot of value or maybe a hurdle that you had struggled with, with a client and you were able to jump over it?

Ian Campbell: Well, I can give you an example, not exactly along the lines you are asking but I am very interested in the push back I am getting or seem to be getting on this issue of whether strategic buyers exist. Here is an example of something that had happened.

Quite a long time ago, a father and a son; the father getting on in years but still active, the son being 50 or so, came to my office. They came to my office for valuation. They wanted to talk to me about engaging my firm to do valuation for them and I sat with them for about 15 minutes and learned in that time that they actually owned three businesses.

They owned two of the businesses, one business was substantial. One business was much larger than the other of the first two but they were largely in the same area of business – same industry, same type of products – but they weren’t competitive to each other. The third business was not big and it was an entirely different business but it was profitable and family members are involved and they owned shares in all three businesses.

So after talking to these people for about an hour and talking to them about why they wanted to operate the largest business on a continuing basis and where it was going to go in light of the competitive environment they were in, and this is by the way before all the globalization in 2008 financial problems. It was quite some time before that. I rather concluded that it would be smart to talk to them about whether they would be interested or had contemplated selling the largest business because there were evident strategic buyers for it.

After we talked for maybe another half hour, they not only identified who the strategic buyers would be but who was in the management or ownership of each of those strategic buyers ought to be contacted if they decide to sell. After a couple of more meetings, it was determined that they thought- let me step back. I believe advisors advise, they don’t make decisions, so I told them the pros and cons as best I could of what I saw as the alternatives available to them.

They came back and said, “You know we’ve thought about this and we now think, contrary to when we first walked into your office, that our absolute best strategy is to sell the largest business and retain the two smaller businesses and build those to the benefit of the family and that way, we diversify our risk.” So the net result was that the largest business was sold through a competitive sales process that worked out very well for the family and I know for the ultimate purchaser.

The family retained the two smaller businesses under continued family ownership and as best I know and I periodically hear not as an advisor, just as a friend almost, that they are both flourishing and they both provide family members with capital value and annual dividends. That is another story that actually worked out differently, in that case and the people who came into my office first thought but at the end of the day, they left doing something else and are very happy to have done it.

Noah Rosenfarb: That’s great. How about the flipside? Where did someone go wrong and what did they do, what were the results, and what should they have done?

Ian Campbell: Where did someone go wrong? Most of the things that I was involved in where things went wrong were there was a serious dispute that was litigated. I would say that – and I was involved in a large number of them and without making more of it than it is, many of them were substantial ones in Canada. I would say that broadly speaking, the people involved in those disputes were all good people.

They were all nice people but they couldn’t- I shouldn’t say they couldn’t – they didn’t initially, in most cases, deal as logically as they might have or they were dealing with agreements that had been generated for them that didn’t satisfy their purposes in the end and were caught up in badly worded agreements. There was as much that as there was, what I would describe as emotional turmoil.

But in the end, most of those circumstances, almost certainly ended up, as best as I can tell, with the usual thing that happens in a disagreement, which is, if done right, neither party is 100% satisfied at the end.

Noah Rosenfarb: Okay. Well, for those people that want to get in touch with you, I know they could visit (that is five zero hurdles dot com) and a link to that website will also be on the Divestopedia website. Where else might people get in touch with you – phone, e-mail, on LinkedIn, what’s a good way?

Ian Campbell: Well, if someone wanted to phone me, they could reach me at this number 905-274-0610. They could send me an e-mail. My e-mail address is [email protected]

Noah Rosenfarb: Great. You had mentioned some LinkedIn articles that you’ve been writing. I am assuming that it is Ian Campbell right on LinkedIn people could find you that way as well.

Ian Campbell: Well actually, if they wanted to find me on LinkedIn, they would have to find me at Ian and then my middle initial R. Campbell. Because Ian Campbell well is not as common perhaps as John Smith, is not with people with a Scottish background that uncommon.

Noah Rosenfarb: That’s great. Ian I want to Thank you for coming on the show today, sharing your expertise, and more importantly taking the time to put together 50 Hurdles because I do believe it is a wonderful resource for professionals and the clients that we advise to take a look at some of the issues and challenges they might face in a transition.

Thank you again for coming on the show and sharing your knowledge with us. To all our listeners, make sure to join us again. Please don’t forget to rate us on iTunes and share us on your social media sites. We always appreciate getting new listeners and hearing your feedback.

Everyone, have a great day.

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Written by Noah Rosenfarb

Noah Rosenfarb
Noah Rosenfarb, CPA/ABV/PFS has devoted his career to advising business owners on all things related to money. He is a Personal CFO and Holistic Wealth Coach at Freedom Business Advisors, which provides middle market business owners guidance on how to successfully transition out of the management and or ownership of their company. Mr. Rosenfarb is the author of EXIT: Healthy, Wealthy and Wise.

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