Family Business Matters 11/13 04:56

The ABCs of Business Ownership

In addition to capital, attitude and behavior are two other components to
the farm business ownership equation that need to be considered.

Lance Woodbury
DTN Farm Business Adviser

When we think of ownership in a business, we tend to focus on financial
components -- for example, shares of a corporation, partnership units, capital
accounts, appraisals or valuations, equity or net worth. Key questions center
on one's capacity to participate in the financial life of the organization.
This is the "C" for "capital" in the business ownership equation.

There are two other components of the ownership equation. Both try to get at
the less-tangible aspects of ownership and attempt to answer this question:
Beyond the money, what makes one a good business partner? The query is relevant
whether you are considering family members or key employees as new owners in
your company.

The two additional criteria are "A" for "Attitude" and "B" for "Behavior."
You've probably already considered a prospective owner's knowledge, skills,
background and trustworthiness. These additional characteristics go a bit
deeper.

"A" FOR ATTITUDE

As you consider future partners, how would you characterize their attitude?
Do they approach their work with enthusiasm? Are they fully engaged? Are they
generally excited about the future? Do they see the glass as half full or half
empty? Many business owners would take a partner with the right attitude over
other factors such as education or experience.

Similarly, how do they respond to challenges or setbacks? Are they able to
rebound from adversity and learn from their mistakes? Or, when challenged, do
they become shrouded in a bad mood that brings everyone down? When the going
gets tough, you want partners with a good attitude about the future. Will the
way they approach opportunities, especially problems, enhance your partnership?

"B" FOR BEHAVIOR

Another consideration is how a potential partner behaves. The distinction
here is not whether their behavior is good or bad, as it is easy to rule out a
potential partner who exhibits poor behavioral choices. Instead, think of
behaviors you hope a partner will demonstrate.

For example, one behavior involves taking responsibility for broader
opportunities or challenges in the business. Early in my career, I saw a chance
to hire someone else in our company who I thought would be a good fit. While it
didn't work out, I'll never forget the CEO thanking me for "acting like an
owner" in trying to bring value to the company outside of my division.

Another behavior is whether a prospective owner acts sacrificially. Will
that person give up something in the short term if it helps the organization?
It might be pay or time or a chance to do an easier task or job. He or she gets
the idea that some pain now can pay off in the long run.

Yet another behavioral characteristic is what I call "low drama." These
people don't get upset easily, they approach problems rationally, they limit
their complaints and don't gossip, and they offer solutions along with
identifying problems. Finally, they think long term and can articulate "second
order" effects, where they consider the future implications of a decision, not
just the immediate consequences.

To sum it up, both attitude and behavior are captured in the idea of
"psychological ownership." The way potential partners express their outlook and
how they act in the business shows they already think and behave as an owner
long before they have made a financial investment.

"C" FOR CAPITAL AND CONSIDERATION

Attitude and behavior might be harder to quantify than capital, but they are
just as important as the financial resources an owner brings to the table. All
together, these three components offer a multilayered approach to considering
new owners in your family company.


Lance Woodbury can be reached at lance.woodbury@pinionglobal.com






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