Issue 104

Family Business Transfers

Criteria for Choosing a Family Business Consultant

In the last issue of The Exit Planning Navigator® (contact Christy Viviano, for issue 103), we discussed when it is appropriate to enlist the expertise of a Family Business Consultant. We also looked at typical warning signs and indicators that might suggest the need for a Family Business Consultant.

After you have determined that you need to bring in a Family Business Consultant to help deal with the emotional and behavior issues associated with family business transfers, the next step is to find one that matches your Exit Planning objectives. When determining if a prospective Family Business Consultant is right for you, consider the following:

  • Credentials
    • What is the consultant’s profession of origin?
    • What does s/he do to keep informed on industry information, trends and training?
  • Client Definition
    • Who does the Family Business Consultant define as the client?
    • How is it different than who you define?
  • Scope of Project
    • Assessment/Diagnostic of the Problem — How much information does the consultant gather and assess to diagnose the problem? Does s/he or the consulting team have an awareness of finance, law, management science and behavioral science?
    • Planning — Make sure the consultant is inclusive of active, inactive (in the company), involved and passive (as owners) family members.
    • Implementation — Does the consultant get involved in implementation?
    • On-Call — How available is the consultant throughout the journey?
  • Approach
    • Prescriptive — Does the consultant give the answer and develop the plan according to his or her own opinions (prescriptively) or does s/he include others in developing it (inclusively)?
    • How does the Family Business Consultant work with other professionals?
  • Type of firm
    • Sole Practitioner — Does the consultant leverage others to accomplish the engagement or does s/he do the core consulting work individually?
    • Multi-Dimensional Team — Is the consultant a part of a consortium of professional advisors?
    • Sub-Contractor — Will the consultant work as a part of your team or will s/he engage with the client independently? Why?
  • Location of services
    • Ask if the consultant works locally, nationally or internationally.
    • Ask how the consultant approaches clients out of state, including if, and how, they bill for travel time.
  • Fees
    • Hourly fees can average from $200 to $750 per hour. If a consultant works on an hourly rate, ask why? o Daily rates are also common. They typically range from $1,500 to $7,500. Be sure to ask what the deliverables are on a daily project. Also ask if this rate includes preparation and follow up. Often, each day in the field requires up to a day for preparation and follow up.
    • Some consultants will define the scope of a project or a program and charge a preset fee for that engagement. Some will require a retainer fee be paid at the commencement of the engagement with the remainder paid at designated time periods.
    • Value-Based — Rather than billing for a set hourly or project fee, the consultant bills based on the perceived value received by the client.
    • Success Fee — In addition to a current hourly or project fee, a multiple of excess fees, over and above the agreed-upon hourly or project fee would be charged if the results of the engagement meets or exceeds the client’s expectations

Using a Family Business Consultant helps business owners make sure that all parts of the family business system (the family dynamics, the ownership goals and the business management) remain congruent during the exit planning journey in order for the entire system to remain performing at its best level after the business transition. If you have any questions about Family Business Consultants, please contact us to discuss your particular situation.

Subsequent issues of The Exit Planning Navigator® discuss all aspects of Exit Planning. If you have questions, please contact Kevin Short, Managing Director (