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Francois de Visscher: Time to be proactive and prepare for the upturn

It's not just the financial losses, or the depth and breadth of this worldwide recession that is keeping many private business owners up at night – it's the uncertainty. 

Uncertainty about the future of the business, an uncertainty that creates immobility, stress and distraction.

Western businesses are not used to dealing with uncertainty. They are used to dealing with financial models, statistics and fairly predictable outcomes of their actions. They do well when they can react to an actionable fact, but in today's environment, there are very few reliable facts or figures to react to. And even if companies were to follow the most rigorous regimen of business management and financial controls, chances are they could still be one in a long line of dominos falling on their face.

In this kind of environment, families should protect what they have and prepare the business and the family to take advantage of future growth opportunities, whenever they may appear. Focus on the how not the when. It may be a long storm but sunshine often follows rain.

One of the many profound advantages of working in a family company is that we have a built-in support system. By definition, we are not in this alone. We have family members and trusted management teams working by our side, sitting on the board and sharing decision-making responsibilities. So this is the time to harness the inherent advantages of a family firm. Instead of letting the recession defeat us, we must be proactive as a family and a business by developing three family business assets: governance, long-term growth capital and shareholder liquidity. If we take measures to enhance these resources now, we are more likely to be better placed when the economy finally turns around, whenever that may be.

Effective governance starts with the family. Rather than worrying about outside events we do not control, now is the time to reinforce family governance structures, intensify family information programs and bring the family shareholders closer to the business and its management team.  This would also be a great time to recruit outside directors with the skills and experience in functional or industry areas that will be useful in the future. We should even consider creating board committees for specialised functions, such as strategy or finance, to streamline future decision-making processes.

Businesses need to be prepared for the upturn when it eventually arrives instead of waiting for it to save them. Nothing could be worst than having sudden and unexpected growth opportunities and not being able to take advantage of them. Having the capital and the capital structure to take advantage of future growth will distinguish the survivors from the winners. Lining up long–term equity sources – patient capital sources – from compatible and like-minded investors is crucial to benefiting form the next wave of global growth. One of those sources may very well be family groups or single family offices that are long-term, like-minded and understand family businesses. 

On the liquidity side, we need to anticipate the potential needs shareholders may encounter.  Surveying shareholders could uncover financial stress they are experiencing personally in this crisis. We may consider creating a shareholder loan program or stock redemption program to help family shareholders through such financial stress.

Taking time now to position your company and family for better times — which are bound to return — has another benefit: it will help take your mind off whichever combination of economic woes you may be experiencing. Action is often the best antidote to the blues.

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