The challenge of transitioning a family owned business.

1. The Family Business DilemmaThe challenge of building, growing and leaving business wealth BROWNSTONE Capital Advisors LLC BROWNSTONE

3. More than three-fourths of all owners have 50% or more of their personal wealth tied to their business

4. More than 60% do not know the value of their business

5. More than two-thirds do not have a business succession plan

6. 70% fail to successfully transition their business to their heirsBROWNSTONE

8. By the Numbers Conclusion … Owners who have been successful at starting and growing their business have not developed the skills needed to transition it to support “what comes next” … BROWNSTONE

9. Business Life Cycle Personal Life Cycle Maturity Renewal Decline Growth Business Life Cycle Start-Up BROWNSTONE

10. Business Life Cycle Maturity Renewal HIGH INCOME – LOW VALUE Decline Growth Start-Up BROWNSTONE

11. The Challenge of Family Transition Family Owned Business Survey … 88% … Transition to family successors 2003 Mass Mutual Survey BROWNSTONE

13. Gen 2 – Gen 3: 85% failure rate

14. Gen 3 – Gen 4: 96% failure rateBROWNSTONE

16. Gen 2 – Gen 3: 85% failure rate

17. Gen 3 – Gen 4: 96% failure rateOwners do a far better job of creating business wealth than in transferring wealth to their family … BROWNSTONE

18. Business Wealth and Wealth 70% … failure … Creator to Successor 85% … failure … 2nd Gen to 3rd Gen 94% … failure … 3rd Gen to 4th Gen BROWNSTONE

19. Business Wealth and Wealth Failure: Following the transition, the beneficiaries lost control of their wealth through foolish expenditures, bad investments, mismanagement, inattention, incompetence, family feuding, lawsuits, or other causes within their control. BROWNSTONE

21. “Rice bowl to rice bowl …”

22. “Clogs to clogs …” BROWNSTONE

23. Business Wealth and Wealth Chinese saying … Wealth never survives three generations BROWNSTONE

24. Top Level Reasons 1. Families fail to understand that preserving wealth is a dynamic rather than a static process. Each generation must be able to create wealth. (Creation – Stasis – Entropy). 2. Families fail to apply appropriate time frames for successful wealth preservation 3. Families fail to understand that the fundamental issues of wealth preservation are qualitative, not quantitative BROWNSTONE

25. An Inconvenient Truth The continued emphasis on maximizing the wealth to be transferred has done NOTHING to improve the situation The definition of insanity: “continuing to do the same thing, over and over again, and expecting different results.” Gertrude Stein BROWNSTONE

26. What Are the Reasons? Poor tax minimization strategies … Poorly designed estate plans … 4% 4% First Conclusion: The Accountants and Estate Planning Attorneys are doing a great job! BROWNSTONE

27. What Are the Reasons? 1. A breakdown of Communications and Trust within the Family Unit 60% Communication = Consists of two root words: common and action Common action brings alignment Trust = Consists of three main components Reliability: Do you do what you say you will? Sincerity: Are you becoming whom you should? Competence: Can you accomplish the task at hand? b BROWNSTONE

28. What Are the Reasons? 2. Inadequately Prepared Heirs 25% Williams Group: “… many family leaders devoted far more time preparing their estate documents than they did to preparing their heirs for the impact of those documents.” BROWNSTONE

29. What About Successful Transitions? Total Family Involvement 2. A Process that Integrates Decisions 3. Learning and Practicing New Skills BROWNSTONE

30. What’s the First Step? Family Mission Statement: What is Our Shared? Purpose of Wealth? For what Purpose has our Family been so Blessed? BROWNSTONE

31. Contact Paul Brown, Managing Principal Phone: 509-926-6922 (direct) E-Mail: paul.brown@brownstonecap.com URL: www.brownstonecap.com BROWNSTONE