Family Business Succession: The Conflict Legal Documents Cannot Resolve

Speaker A: It shouldn't be after I die. Otherwise I'm going to have to hire a bunch of professionals to be in charge of my family stuff. Now, I will agree. Almost all the professionals make more money. If a family is dysfunctional. I'm just not too sure the family would choose it if they knew. We should have advisors that help us, not tell us what to do. I have advisors. I have like you, uh, a financial advisor, M and E advisor, an uh, accountant that I work with that I now bring my kids and my wife to. We walk through what's going on because my job was to take care of them. I'm now 63. My job is to. Now I've already done that. Now my job is to transfer the knowledge of how to. And is it a little clumsy? Gosh, yes. But I'd rather them be clumsy when I'm around than clumsy when I'm not.

Speaker B: If something happened to you tomorrow, would your family be able to work together or would your business become a source of conflict? Unfortunately, family conflict is one of the biggest obstacles in building a business that lasts beyond its founder. My guest today specializes in helping business owning families resolve conflict, strengthen relationships and create a lasting legacy. Welcome to Business beyond you, the one stop hub for insights, conversations and perspectives. Business owners need to build a business that lasts beyond. Hi, I'm Sara Vaziri. I'm an A advisor and my guest today is Joe Strasseri. Have to say your family name. I forgot to check with you.

Speaker A: That's quite all right. Joe Strazeri.

Speaker B: Okay. Ah, awesome. How about you give us a very quick, um, intro to yourself and then we can go over our questions.

Speaker A: Oh, gosh, that's a long story, but I'll do a quick answer to it. Um, I grew up as a general contractor by trade. I hammered nails to become an attorney at 32 years old at the time. I've been doing this work for over 30 years. Um, we originally started out, um, as a business tax and estate firm. My partner Steve and Mancini and myself formed a firm a little bit less than 30 years ago where we help successful families and business owners A get to the heart of highly relevant matters and B, resolve messes in the areas of integrated tax, asset protection, estate, um, and business continuity planning. Uh, while we were doing that, we found that families often had conflict such that it altered their plan. And we found out that families in business together and not together also had conflict that changed. And they drafted documents in fear of what could happen. Running away from instead of running to some sort of family synergy. So um, with that, uh, Steve and I eventually developed the founders group about 25 years ago that works with families and business owners that are in conflict. So Cesare Mancini does that work for strict families and founders group does it for families in business together or business owners. We also own an educational institute, which is how Sarah, you and I met, where we put on over 200 programs a year on legal, financial and tax technical. Um, so that's where we came from, what we did. So I, Joe Strazeri, not with the firms do, but I, Joe Strazeri, spent about a third of my life, business life, on legal, financial and tax technical for the um, mostly tax for the 30 to 300 million dollar family often facing a tax issue or some sort of confusion. About a third of my life with families in conflict or business owners in conflict or accommodation. And about a third of my business life I spend as you know, teaching others how to do that, do that kind of work. Mhm, mhm.

Speaker B: That's perfect. So our conversation today is focused on that part. You help families who own businesses and are in conflict. Because the purpose of our show is to help business owners build a business that lasts beyond them. And one of the things that prevent that is something happened to the owner and the families get into conflict and they cannot make decisions. So that's the reason that I invited you, because you have worked with so many of the families and maybe you can help our audience get some guidance on how they can prepare themselves. So nothing like that ever happens to, to them.

Speaker A: Yes, we work with about 50 families a year that have about 30 to $300 million with a total assets that either in their tax planning side or in their conflict side. And we work most of those families are business owners, um, within them, I'd say well over half have some sort of conflict, which is why they came to us. The word conflict has such a negative connotation where people say, well, conflict means it's a negative thing. And what we often find is that it doesn't have to be. There's a misunderstanding usually at the root of it. A uh, misunderstanding of underlying fact or a misunderstanding of people's actions, which were really reactions, but they weren't an intentional act per se. And that amasses to what I call motive, where hey look, I'll say, well, Sarah's done this, this and this. So therefore I've decided these are her motives. And tomorrow when she does another thing, that's what she's driven by and I even do it to myself. I'm um, an Italian attorney and I'm boisterous and I'm driven and therefore tomorrow I'm going to do these things and they don't have to be. And so much so that we wrote a book called Motive. We've written seven legal, financial and tax technical books for tabletop books, talking about um, uh, the maybe five minute reads, the shorter ones about subjects like this. And then the book Motive came out last year, which is written for that family, whether in conflict or not facing what do I do next? We've got a business. What is that? And are the motives of the people around me, my advisors, my family, myself driving a bus that I don't realize what's happening and it helps people see that. In fact, that's the meeting I just came out of. Mhm.

Speaker B: So for the families that come to you to help, give us some example of the cases that they come to you and say this is the problem and you can help them.

Speaker A: Sure. Um, I'll talk about the family I just saw, which there is a very large family business. There's one child in it with dad. Mom used to work in the business, but gave that up years ago. There was this. Out of four children, there was a second child in the business who wanted to be in charge of his sister because he was older. And that didn't go well. And eventually the decision was made that the son couldn't be in the business. So now I've got something used to be that isn't two children that aren't that um, do well with their family because they also receive assets. And I've got one child busted her tail in the business working really hard. And mom and dad came in and they said, gosh, we're considering selling who should get what. She helped us grow, but maybe we shouldn't sell. Maybe the other two need a job. But my son in law works in there too and they're concerned and they're really worked up. And last Christmas they were on a cruise together and what? There was a misunderstanding. One of the daughters has a gluten allergy and her food came a half an hour late, two nights in a row. So the dad went over to the captain of the dining room and said, hey, I'm not, no offense, can we find a way where we get all our food together? And one of the children got up and said, I can't believe you did that. You've got the, you've got the servers in trouble. They're really nice people. Why are you always in control? Like that. And then there's this big argument. The reality was the sister was embarrassed because she didn't want to be called out for her gluten stuff. But the real problem was the other daughter said, why did you never invite me into the business? Can you start to see how many misunderstandings there are? And mom and dad are tired, and they want. They're thinking about selling, but then if they do, who gets what and what do they support? But should they be able to. But should they still work? So there's a lot of that going on, and they've got a disharmony amongst family. And as we talked about the plan they were talking about doing, all of it was about fear and running away from this argument and protecting the kids from themselves. And now some of the grandkids, as cousins aren't able to see each other. And the grandma mom who was in my office was, I want my grandkids to be together. I want my kids to be together. What have we done? Well, when we finally talk through it, we're going to have a family meeting. Now, I don't know what's going to happen, but if it was typical, I have one child that I have to meet with. I'm gonna have to meet with each child first alone, and then we're gonna have a group. And oddly enough, dad doesn't know how to say, I'm proud of you. Wow. But he really is. Of two of them. And one of them he's pissed at, and the other one he wishes he could work with, but she doesn't want to give him. Doesn't want to. And so I had to have the conversation with mom and dad over. I'm sure Caesar and his wife had the same conversation about these kids. It's not new news. The other part is that no one ever teaches us as parents how to develop family harmony and run a business. And I'm an entrepreneur, and I'm sure my kids would say I wasn't there as much as they wish I could have been. And I'm sure I was a bit of a grump, and I'm sure I caused to save money on little things, but then I spent 20 grand on a vacation, and they don't understand those two things in conflict. And I've. And so I'm sure I could run into the same thing. I know that there's a set of misunderstandings for years that's been building on each other, and there's hurt feelings because everybody assumed that was an intentional act when it was actually a reaction to something. So I have hope for this family. So I'll probably have this meeting. I'll probably meet with at least the daughter first, and then we'll do a weekend together where we have a dinner on Friday night. And I will have met with all the kids beforehand, and they will have told me how terrible it is. And I've had to remind mom and dad, is your goal to be right, or is your goal family unity? And the dad said, well, I've never done anything wrong. And mom laughed.

Speaker B: Yeah, this is really important. I mean, any person. And I. I feel this very firsthand because, um, when I graduated from mechanical engineering, my dad started a company, and I was totally involved in. That was my. While my sister was a doctor. And, you know, whenever my mom would say that, yeah, we have to be mindful of both of you, I would say, why is she saying that? I'm building this company. My situation is different. And these things, if you don't talk about it after years, it builds up. And as you said, when the time comes to sell the business, now you think that, oh, I'm completely in a different position because I helped building this business versus that person was completely out. And this is great, because what you're saying is that, you know, always owners think that the succession planning starts with bringing a, uh, lawyer or tax advisor. Well, I think that talking about these things is the first step because you don't want to ruin your family by, um, you know, selling your business, as

Speaker A: you said, very much so. Well, you know, when we have a misunderstanding or when we're angry or when we're frustrated, our goals change and how we get there changes. So here's my question. Let's go back and let's just say that the family was going to keep the business, but mom and dad were going to write an estate plan. And let's assume the business is a big half or more of the estate. If there was disharmony in the family, would that change what the parents said we should design? If there was anger, would it change it again? I had to ask them, is it your goal to put guardrails around your kids the rest of your life, or is it your goal that the kids learn how to manage their stuff? And dad said, guardrails. I said, really? Do you have guardrails around your assets? Well, no, I know how to do it. I said, so is it your goal to not teach your children how? But they won't listen. I said, when you're a grump, they won't. You're right. And the mom's smiling and pointing at him. He says, what? And she said, I've been trying to tell you for years they want to learn, but you only want to tell them what to do. You don't want to let them learn how to do it. He said, I'm not ready to be in the wheelchair yet. And she said, nobody's talking about putting you out to pasture. We're talking about them. He said, you just want them to take over. And she said, don't we want them to take over? He said, after I'm gone. And she said, but if they don't learn how, what's going to happen? What would happen to me? He said, do you want to take over? She said, I've seen your life. I don't want it. So again, there are ways. And in their situation like any other, I'm sure there are historical things that are causing strife. So in answer your question, often we spend the night before and then we spend a little bit of time with each participant. The night before we have dinner. We have two days, usually by the middle way through the second day. We found some resolutions that we're making a new path forward. I call it Hope is a great conversation. I often teach, um, psychologists, psychiatrists, marriage family therapists, attorneys how to counsel. And I suggest that the idea that you need years of counseling is good for the counselor from an income point of view. And then they say, well, no, Joe, you just want to give them a pill and it's over with. They need to do the work. It takes years. I said, no, your industry says that because that's your financial model. How about if we get the family more aligned or synergistic and hand them back to themselves and Sarah, I'll share with you, Sarah, what nationality are? I'm Italian.

Speaker B: You are Iranian.

Speaker A: Iranian. So, um, I would contend from more deeper cultures and even my German, I reformed girl. Mama. We used to include our elder states women in our lives. Our great great grandmothers or our great grandmothers, our great aunts. And they were, uh, they were a good measuring vessel for how the family was doing. And they would walk up and say, how's that working for you? When we included them in our lives, our family relationships were better. We don't have them as much our lives. In fact, I can usually tell when the elder generation is included because there seems to be more harmony because they don't let this stuff fester and they help. It's not my goal to try to take a family and work with them. For years, it's my goal to expose what's underneath it and hand a family back to themselves.

Speaker B: Mhm.

Speaker A: Let them grow and do well. Let people feel comfortable instead of concerned that they're going to have to do this alone or have them feel uncomfortable or unsafe or unheard. And as you know. Do you have siblings, Sarah?

Speaker B: Yes, I have a sister.

Speaker A: Do you two love each other?

Speaker B: Yes.

Speaker A: Do you fight well together?

Speaker B: Of course.

Speaker A: Uh, for you, the both is okay. How did we ever get to a societal norm that if we argue we're supposed to hate each other? Why not? Can you be mad at what somebody did but not mad at them? Can you give grace to somebody for having a bad day or a bad year? Is it. Can we find ways to find family harmony? And almost every entrepreneur I deal with would give half their wealth if the family got along. Because entrepreneurs are often told, you need a purpose if you sell the business. And the entrepreneur says, because I spend so much time here, this is not my purpose in life. My purpose is all of you. This is how I serve you. And if I sell it, how do I serve you? Do I help you? Do I help you start a business? Do I finance something? Or uh, can I just go to watch a baseball game with you? So there's a lot to unpack inside that.

Speaker B: Yes, correct. And um, I believe that if this doesn't resolve, you know, especially if, uh, somebody for example, pass away and um, family stays. You know, I have seen situations that, like there was a situation that three daughters were left after mom and dad and they couldn't resolve between themselves and that business was lost because they couldn't make decisions. So how do you usually, when you talk to the owners, how do you usually, um, suggest them set this stage for the time that they are not there. Is there any guidelines that you give them, for example, or what is.

Speaker A: Sure. So for a few things on that if God is, God forbid the parents are disabled or are passed, it's going to be harder. But there's still hope to work with the family together and say, we lost them, um, they really want this. What are we going to do moving forward? And maybe it is sell their business divide. Maybe it is one or two take and one or two don't. But wouldn't it be nicer to go to that from what is it we're looking to run towards instead? Away from. But better than that, even Sarah wouldn't have been great if we resolved it before the parent became disabled or died, when we had their help, not their control. But Their help. Now, I often tell a story. When we lost my dad over a 10 year period, seven times they gave me, he's going to die in one to three days. And it didn't happen. But the last time, the eighth time that we did in over a month or two period of time, he was in the hospital and we finally were going in and out of coma and things like that. And we were faced with this terrible moment where the doctor said, he's going to become strong enough in the next couple of days to a week to come off the machines, but he'll effectively be a vegetable. But he'll be able to open his eyes and know what's going on. And that idea scared me because he would have looked at me and said, what have you done to me? So we had to make the choice to turn off the machines before that could happen. And that was hard. But we were told he'd pass in 20 minutes. It took four hours, but during that time he woke up and he started a thrash. Looked over at me like, what the heck? Because his friends, his children and grandchildren were all in the room and he knew that couldn't be good. I lied to him when I whispered his ear to settle him down because I worried about my mom getting a heart attack. When he settled down, he reached for my mom's hand and he looked at her and gazed. He surveyed the room and he looked at her. He broke his gaze for a moment and looked at me. And even though he had a two down his throat, I heard him. He said, I've worked with you all of your life, son. You've got this right. I heard it, they didn't. I nodded. He looked back at mom. They held hands for a while and he passed. I was miserable. I still kind of am 25 years later. Um, when we walked out of the room, I had both my mom and my sister in my arms. We were sad. I walked out as I lived my life with I've got it. What I didn't realize for a couple years, my mom and my sister walked out of that room with, we don't have it and we never could. Joe's going to take care of us because we don't know how. And the terrible events that have happened since have been from their lack of confidence. A couple years later, I decided that when it comes time for my wife and kids to walk out of the room, they're all going to feel that they can handle it. But that means I have a different job. I have the job to teach and to Mentor. And it's not easy. And they're going to say, dad, you're not listening to me. And dad, you're not. You think I can't do it, and you think it's only your way. And my wife's going to say, you're in control, and all these other things, and I'm going to have to suck it up and help. But I'm sure Caesar and his wife had the same discussion. So how do we help? Or how, if I'm the child, do I ask the parent? I want to learn. Now, I know with me, with my own dad, there came a point in my life that I no longer fought with him, but I asked his opinion. And that shift changes how we interacted. And you know what? As I got older, boy, I found out he was really smart. So how do we pass on that wisdom? And my answer to your question is it shouldn't be after I die. Otherwise I'm going to have to hire a bunch of professionals to be in charge of my family stuff. Now, I will agree. Almost all the professionals make more money if a family is dysfunctional. I'm just not too sure the family would choose it if they knew. We should have advisors that help us, not tell us what to do. Do I have advisors? I have, like you, a financial advisor. M. And a advisor, an accountant that I work with that I now bring my kids and my wife to. We walk through what's going on, because my job was to take care of them. I'm now 63. My job is to. Now I've already done that. Now my job is to transfer the knowledge of how to. And. And is it a little clumsy? Gosh, yes. But I'd rather them be clumsy when I'm around than clumsy when I'm not. So I think the answer is, if it already happened, there's still hope. You can work through it. But it's a lot easier when the. The entrepreneur or the family member that leads is there. And I would never want to leave my wife with a mess.

Speaker B: Yeah, yeah, I totally agree. Once, unfortunately, um, we were called to help selling a business that the, uh, owner passed away. And the wife was miserable. Like, every month she was getting calls from the landlord, all of these people, and she was just crying, you know, she was so sad. And it's. It's a very bad situation. So I hope that by hearing these conversations, all of the owners think that they need to think about, what if this happens? And I don't want to give all of these misery to my family. And think about it before that.

Speaker A: Sure. And then sometimes entrepreneurs can mentor families or family members can ask for it. And sometimes you just need a little bit of outside help to start the flywheel, to start a pattern that makes sense to, to scrape off or to sand off the rough spots and, and then to be able to run the flywheel really well. And I don't think, I don't think it's a weakness for a family to say, can we help some have some help getting over this. They've never done it before.

Speaker B: Correct.

Speaker A: But in choosing that help, would you want help that wants to get paid forever, get paid for years, or somebody who says, let's do this in a short amount of time and I'm going to take your family back yourself?

Speaker B: That's perfect. Joe, thank you so much for joining us in this episode of Business beyond you. I, uh, like to ask you to give our audience, um, another time, a summary of what services your companies provide and if somebody needs your help, how they can reach out to you.

Speaker A: Sure. So from the legal, financial and tax side, if somebody's saying I'm paying too much in tax or I'm going to sell it, I don't want to give as much to the government or I've got to clean up my estate plan. That's our law firm, Stress Area Mancini. We handle about 250 of the one to $30 million families a year for estate planning and about 50 a year of the 30 to 300, that's Strazeri Mancini. And you'll have it up on the thing. It's@strazeriamancini.com We've got offices in San Diego, Orange county and Honolulu. If it was a family, um, also that was in conflict, not business conflict, but family conflict. Even if it was generations or decades or years, even if it was toxic. Strazeria Mancini does that family synergy weekend work that we talked about. If it's business owners in conflict with each other, amongst each other, with them and their family, or a business owner's in self conflict, that's ah, Founders group and you'll have that up. Uh, and then we also have, we've written seven legal, financial and tax technical books for tabletop books. But our most recent one called Motive, Motive M O T I V E you can find on Amazon. My last name is Strazeri. There's a couple of motive books and it's called Motive. Um, and it talks about the invisible guest in your wealth bias relationships. Short read about 100 pages, two, three hour read with some QR codes with, you know, one or two minute videos and some exercises, that would be great. And if you didn't want to come see us and you just wanted a good idea of kind of understanding the landscape better, I'd read Motive. It's a couple, three hour read or give it to somebody you love. And that's on Amazon.

Speaker B: Okay, awesome. Thank you so much. I will add all of this information under this video. Um, again, thank you and have a great day.

Speaker A: Thank you. Bye. Bye. Bye.