by Mark K. Harder
Publicly traded companies have boards of directors primarily comprised of outsiders. But how many owners of family or other closely held businesses think about, much less have, outside directors for their businesses?
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Its More Than Business. Its Family.
by Mark K. Harder
Publicly traded companies have boards of directors primarily comprised of outsiders. But how many owners of family or other closely held businesses think about, much less have, outside directors for their businesses?
David Hodge, CFA, CFP
Gimbal Capital Management
Tell the story of GCM, how it was founded & how it became a family business.
Gimbal Capital Management was founded in 1994 by Dan McAdams to provide investment management services to families in West Michigan. Dan got his start in West Michigan as a commercial lender at Old Kent Bank in the late 1970s, and spent time as the controller of a beef processing company in the early 1980s.
When one of his banking clients developed and sold a large industrial parcel, Dan started working as the Chief Investment Officer of his family office. This gave Dan the experience to see how challenging it could be for families to coordinate their investments with their operating business and generational succession.
Dan founded Gimbal Capital Management to implement his vision of providing best-in-class investment services to families in West Michigan, and his first client was the family with whom he had worked. The business grew rapidly, and in 2003 Dave Hodge, Dan’s nephew, approached Dan to ask him how to start a hedge fund. Dan knew that he could trust Dave and thought he would be a good fit for the business, so in 2004, Dan hired Dave and Gimbal Capital Management became a family business.
What is the most rewarding aspect of being part of a family business?
Investment management is a business that works in and delivers, an intangible product. As a result, quality can be very difficult to gauge, and results are not immediately obvious. In this type of business, trust is extremely important, and the natural bonds formed in families can create the basis for an excellent working relationship.
In addition to helping us work together well, mixing business and family has worked to bring our families closer together. With an uncle-nephew relationship, after the next generation grows up, it can be difficult to keep close family ties, particularly after kids grow up and have kids of their own. Working together means that you live together during the workday, and this keeps our family closer than it would be without the business.
How have you managed to grow and maintain good family relationships?
Good family relationships stem from quality communication. This starts with respect and trust, and by being in a family business, we know that we have to treat each other well, because we’ll be seeing a lot of each other!
In addition, we work hard to maintain openness in our communication. We don’t assume how each other thinks about decisions, and we talk freely about the things we think are important. We don’t think you can have open communication without respect and trust, but just having respect & trust doesn’t mean that you will automatically have openness in your communication. We work on this and make sure to take each others’ thoughts into account before making big decisions.
How has being a family business helped you attract top talent?
In the investment business, the quality of service depends entirely on the people you are dealing with. The value of the business is almost entirely intangible, so business succession and continuity is a point of major importance with our customers and employees. Family involvement assures that our business will thrive for decades to come, and this commitment on the part of our family inspires confidence among our clients and employees.
Talk about your experience as a member of the FBA, how it has helped, what value you’ve gained, and your involvement.
When we first joined the FBA, we quickly learned that the events were filled top-notch, relevant content. The events alone were worth the price of admission to be a member of the FBA, but what added the most value to our experience was when Dave joined NextGen group #11. Being able to interact with peers on a monthly basis and standing shoulders together going through family business transitions was a huge help to enabling a successful transition in our business, and giving Dave the confidence that he needed to step up into new leadership roles.
NextGen leaders have a unique opportunity to increase the financial value of their company by driving three key conversations with the NowGen that can mitigate business (and valuation) risks. Here are the risks and their counter-balancing conversations:
The NextGen can take a leadership role by driving these crucial conversations. By mitigating these key valuation risks, the NextGen can help forward successful succession plans while also increasing the value of their family business.
Credit: Matt Rampe of Beene Garter
As president of Grand Rapids Label and chair of the Family Business Alliance, Bill Muir understands what family-owned companies are going through right now. According to Muir, manufacturers remain optimistic heading into the new year, and they’re making more investments to support their customers.
Eventually, the economy will go into another cycle and we’ll have a downturn. How well are family-owned businesses prepared for it?
I think family-owned businesses have gotten smarter in terms of not getting too far ahead of ourselves. I think there is a conservative nature of a family-owned business compared to another business in terms of being able to hold cash. It is different because family-owned businesses are willing to put their own money back into the business to support it.
When you think about your business and its brand, what words come to mind?
Pause. Really think about this for a moment. Jot down 3-5 words.
So, what words made your list? Quality? Service? Innovation? These are all great words. But, what about family—did it make the cut? If not, we suggest that it should. And research supports our position.
Sure, working with family can be tricky, but in the minds of your customers, family is a positive attribute. Family Business Magazine reports that 60 percent of consumers say that they prefer to buy from family businesses.
Here are a few reasons to brand yourself as a family business and examples of our FBA members who are getting it right:
1. Humanize your brand. Without a doubt, your business has a story—one that includes a unique set of circumstances and an interesting cast of characters. These stories give context to your business, inspire, and ultimately make your brand more endearing and relatable.
Take this story from BISSEL Inc. BISSELL started out of necessity—Mr. and Mrs. Bissell was looking for a more efficient way to clean up the constant trail of sawdust in their crockery shop. Mr. Bissell invented a unique sweeper and patented it. The story goes on to share that after Mr. Bissell passed away, Mrs. Bissell the business and became the first female CEO in America.
The BISSELL story is pretty remarkable. It gives you a peek at the family’s values of innovation, tenacity, and perseverance.
2. Set yourself apart from the competition. Anyone can start a business, but doing so, and growing it with family, is unique. Use this to differentiate yourself.
Researchers from the Institute for Family Business conducted a survey of 125 family businesses for their report titled Family Business Branding: Leveraging stakeholder trust (note: this report is loaded with great information—definitely worth skimming). Participants were asked why branding themselves as a family business was beneficial. The report states, “A distinct family business brand is assumed to contribute to a company’s image of trustworthiness (81 percent), social responsibility (70 percent), quality-orientation (68 percent) and customer-orientation (67 percent).”
Take King Flour as an example. On their website they say, “King Milling Company has been family owned and operated for over one hundred years. From its humble beginnings using the stone grinding process, to the fully automated network of steel rolls today, the King Milling Company has always pushed to be on the leading edge of milling technology. A quick look at our history will show that our company has always strived to be a pioneer in the milling industry, finding the most efficient way to produce the highest quality flour and wheat products for our customers.”
Without a doubt, this type of information can go a long way in differentiating yourself on the shelf.
3. Build trust. The title of this 2015 Harvard Business Review article says it all—Study: Customers Really Do Trust Family Businesses More.
Positioning yourself as a family business demonstrates steadiness, reliability and a commitment to being around for the next generation. All of these things help customers feel confident and secure in your relationship.
We like this example from Skytron. On their website they say: “Skytron is proud to be a privately held and family-owned company. Since our founding in 1972, we have stood firm on this business structure. We believe it’s one of the many ways that demonstrate our commitment to integrity and long-term focus.”
Reflections: If you are not currently branding yourself as a family business, why not? How could you use this key part of your business to build trust, differentiate yourself and connect more deeply with your customers?