Latest / Reframe First / Craig Aronoff, Co-Founder at The FBCG | Inside 3,000 Family Business Transitions

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Craig Aronoff, Co-Founder at The FBCG | Inside 3,000 Family Business Transitions · Reframe First

• Oleksij Rak: And hey guys, welcome to another episode of Free Frame First. I'm Alexey, I'm the host of the podcast and let me welcome our today's Craig Aronov, co-founder at Family Business Consulting Group. Hi, Craig, it's great having you here. Craaig Aronoff: Great, great to be with you. Oleksij Rak: Yeah, so from what I read about family business consulting group is like you're in operation since 1994. So it's like more than 30 years and your team has worked closely with more than 3000 enterprising families around the world. that's like that's, that's wow. That's amazing. That's a really long period of time. And that's a lot of families that you help. And could tell us more like... about what you at FBCG what your buildings are and how it operates. Craig. Craaig Aronoff: Well, we're fortunate to have a brand name that describes exactly what we do. We are the family business consulting group. Uh, it was no small deal to get that brand name back when we got it 30 something years ago. Uh, and we work with family owned businesses, primarily as it relates to transitions from generation to generation. work with comprehensively with all aspects of all dimensions of, that family and its business. So. Oleksij Rak: Yeah. Craaig Aronoff: From the business side, we're looking at strategy, we're looking at operations, we're looking at finance, we're looking at leadership, we're looking at succession, looking at governance. And simultaneously, we're looking at the family ownership side, which means we're looking at family dynamics, which means we're looking at ownership goals to the extent that the owners have gotten together and articulated their goals. We're looking at how they... Oleksij Rak: Okay. I'm at the goals that set up. We're looking at how we can interact with each other and take over each other. we're looking at how we can make we're not group of people that are in situation. Craaig Aronoff: interact with each other and govern each other. We're looking at their estate planning and how they plan to pass ownership from generation to generation. We are particularly interested in working with second and third and sometimes even fourth, fifth, sixth generation family businesses. So in a second generation, we're looking at pretty much at a sibling team and brothers and sisters that are figuring out how to work together as in the business or not in the business. Oleksij Rak: So. So in generation, we're looking at the of three most assimilated groups in United And the number of sisters of the three young men from the other hands in the business, for nine in the business. And the number of the women in nine in the business. And the number of women for nine business, for nine number of the women in the for And nine And the number And the number in business. the number business. for nine in business. And Craaig Aronoff: and as owners or not as owners. In a third generation, we're now working with their children and their cousins and the numbers are starting to pile up. So we may have a dozen or more. counting the living generations, we may have 20 ⁓ more family members who are owners and or involved in the business or not involved in the business, ⁓ receiving from the business, having opinions about the business. Oleksij Rak: We're not in the business. Receiving distributions from the business. opinions about the business. Somehow finding ways to work together. Craaig Aronoff: ⁓ And somehow finding a way to work productively together and in the meantime having normal family dynamics Which means they're having arguments with each other and sibling rivalry and all the things that go with that and you get another generation and we have families that that have 200 related family share how do they organize themselves and how do they work together? And do they create family structures as well as business structures? So it's it's It's very comprehensive, it's very complicated, and it's very unique. One of the major things that we keep saying to ourselves is the day that we stop looking at each client as unique is the day we ought to stop consulting. So it's not us saying, here's best practices, here's what you ought to do. It's us saying, we need to understand everything about you. You need to pay us while we learn. Oleksij Rak: Okay. Okay. Craaig Aronoff: all about you and all about your business and all about your finances and all about how Aunt Susie got divorced from Uncle Jim and how that shook out through the family. And then we need to understand how you interact with each other. We typically interview most, if not all, when there's 200, we don't interview all of them. But we'll interview anywhere from a handful to 30 or 40 or 50. Oleksij Rak: I'm to be providing a full interview. You know, anywhere from about an handful to 30 or 40 or 50, we need individuals in the system, which would mean family members, homeowners, non-family executives. If they have more directors, are directors, they are area directors, and independent directors. We need to afraid of having to go to this. We hope that the setup will be for directors and encourage them to include independent. Craaig Aronoff: ⁓ key individuals in the system, which would mean family members, owners, non-family executives. If they have a board of directors, they're directors, they're independent directors. We are great advocates of governance, so we help them set up meaningful boards of directors and encourage them to include independence and help them find good people to be independent directors. And all the time, I keep saying to them, this is... Oleksij Rak: I think I can say that this is not best practices. This is figuring out the best practices are you. say to them, why do you want to somebody else's best practices? You don't let them be around. What's best for you? let's figure out what the best practices are for you. You have to give the circumstances that exist in the business. I can say that a lot of the good news is. Craaig Aronoff: not best practices, this is figuring out what's best practices for you. say to them, why do you want to do somebody else's best practices? You know, let's figure out what's best for you and let's figure out how best to implement them if we can, given all the circumstances that exist in the business and in the family. And I say to them, look, the good news is you're a family business. Within constraints, you get to make up your own rules. And the bad news is you have to get together and make up your own rules. So that's what we do. And it's very complicated. When we started, which was in the mid-80s, I was a college professor. had a whole career as a college professor and was able to recognize, grew up in a family business. I'm teaching business and I'm realizing we don't pay any attention to family businesses at all. So I start programs for family businesses and then recognize Oleksij Rak: They have to agree, right? Craaig Aronoff: that family businesses are severely underserved niche and the niche is half of the economy, literally. So it's an enormous niche. Having served 3,500 clients over 30 something years is a tiny drop in the bucket because there are millions of family businesses. And as hard as we've tried and as much exposure as we've gotten, and we've had Oleksij Rak: Okay. Okay. Craaig Aronoff: columns in national magazines, we've had newsletters with major accounting firms, ⁓ we've established well over 100 programs at colleges, universities, made speeches at them, spoken to trade and association groups, all of that, ⁓ I was quoted in the Wall Street Journal last week, regular ⁓ exposure, ⁓ I still constantly find family businesses that say, Oleksij Rak: We and I'm just wondering if you could make your own county parks. We do have a lot of other programs in the university. We have a lot of in the community. We have a of in the of in of in We lot of lot of of of Craaig Aronoff: You mean there's somebody that can help us with something like these problems that we're having. So we're still expanding the market because the market is still becoming aware that services like ours are available. And that has allowed us to grow all this time. We started the business, John Ward and I were the founders. We worked together extremely closely. We developed our ⁓ of client centered. Oleksij Rak: . . Craaig Aronoff: it depends approach to clients. Others began to recognize that this giant market was out there and psychologists started saying, ⁓ I work with family businesses, but they didn't know anything about business. And accountants started saying, I work with family businesses, but they didn't know anything about family dynamics. So all kinds of insurance people were saying, gee, you got to state problems and you need cash by our insurance. It will solve all your problems. So everybody started trying to reach family businesses, but virtually there's some others that do it well now in addition to us. very few took the comprehensive client centered approach that we did. we more demand than we could possibly, John and I had more demand than we could possibly handle. So our job and our motivation in creating our consulting group was to identify and develop other people who could approach the clients. ⁓ in a way similar to and at a quality similar to what we were doing. And the challenge of our consulting group was to find others who could do that. We now have about 30 consultants about 12 staff. So we're up to about 40 people. We have our own problems and dealing with our own structure with a that size. But we are continuously looking for people who can Oleksij Rak: ⁓ good. Craaig Aronoff: have the experience, the background, the knowledge, the values to be able to approach the clients in the way that we think is appropriate. So we're always looking for more people. We're very selective in who we choose. And we're always looking for more clients, but we find steady stream of clients that allow our company to continue to grow. Oleksij Rak: Wow, I've seen it in series, know, like series like Succession, Yellowstone, but you're... Yeah, but you're having this... Craaig Aronoff: Oh yeah, there's lots of shows. It's a very popular theme for drama and it's dramatic. And we find ourselves right in the middle of that in real families, in real businesses, many of which are brand name businesses. We rarely can name our clients, but because this client had a biography written about the family, one of my clients was in the New York Times. Oleksij Rak: Yeah, it's been. Craaig Aronoff: and the Aux Solzberger family and in the middle of trying to preserve this institution that's important to the world in terms of particularly today in terms ⁓ freedom ⁓ of the And ⁓ I just sit and say, wow, I get to work with these people. This is unbelievable. Oleksij Rak: Okay. And what's the typical size of the like family enterprise that you're working with? was the typical size like of Craaig Aronoff: So, Well, there's really not. They have to be big enough to afford us. ⁓ But, you know, we're talking about firms that have from $10 million ⁓ revenue and up. A lot of our companies ⁓ are estate related. ⁓ Real is a very field for family businesses to be in. And they have assets that are greater than their than their cash flow suggests. And ⁓ Oleksij Rak: I can't imagine. Craaig Aronoff: our largest clients are literally the largest businesses in the world. your store to Walmart are family businesses and are potentially clients of ours. ⁓ And of them, as I said, are brand names are immediately recognizable with billions and sometimes hundreds billions ⁓ of sales, if assets. ⁓ But typically, ⁓ a substantial ⁓ Oleksij Rak: So, same with the finance. So, but typically, if you're in United States, it's 50 to 100 million in sales, something like that, right? They're about, I think, they call us up. Craaig Aronoff: 50 to 100 million in sales, something in ⁓ that range. They typically call us up or they're referred to us by our existing clients. Oleksij Rak: Is it right to say that most of your clients come to you when they're in some kind of advisory crisis? need to, the biggest challenge for them at that moment is ⁓ to change operationally because they need to just sit together, agree and start changing way they operate. Craaig Aronoff: Well, operations may be the issue. Family dynamics may be the issue. We're fighting with each other and we need help. Governance may be the issue. How do we make decisions together? So our clients are a combination of people who have run into some kind of problem. You know, I've got three children and I can't decide which one should be my successor would be typical and the kind of thing you see on television and trauma. Oleksij Rak: you Craaig Aronoff: but, increasingly, and as I say, we've written extensively, we've written collectively, our group probably has written 30 or 40 books on family business and in all of its dimensions. so, I mean, we have books on family business compensation and people will come to us and say, ⁓ you ⁓ I've three kids in the business, but they have really different jobs. And I'm I should pay them all the same because they're my kids. but they're really contributing differently to the business and they have different responsibilities. What do we do? So, you know, it could be a compensation question. The New York Times first question was four ⁓ siblings the third generation are on the board. We're all getting older and this to be a publicly traded company. And our other directors are very prominent people. ⁓ How do we decide which family members in the next generation are going to be board members? ⁓ And what's written up in this book is a case where one of the sisters said well I guess each of us have to pick one of our children to be on the board and my response was Are you one family or you four families and they were just silent for a while and then one of them said well We're one family and I said well, why do you each need your own director on the board then? Oleksij Rak: Okay. Okay. Craaig Aronoff: And I said, if you do that, you're sort of institutionalizing the idea that each branch of your family has different interests to be represented, where your family should be working together to define their common interest and then choosing among them who would be their best representatives on the board, which is what they decided to do. they immediately said, well, there's four of us, we're not going to have four family members on the board. That would be too tempting. We'll have three or we'll have five, but we'll find the best ones. ⁓ You know, so but but increasingly because we put so much literature out there Family businesses understand that there are challenges in front of them and they call us up and say, know We're facing transitions. They won't happen for ten years, but we want to be ready help us ⁓ And in many occasions our consultant will develop a relationship I've had relationships with clients that lasted over 30 years and went through two generational transition Oleksij Rak: Okay. Okay. Craaig Aronoff: ⁓ So it's not a specific, it is a specific issue. Often is not a specific issue. It is just a recognition that, you know, we're going into this territory that we're not with and we need a guide. And you guys seem to be extremely experienced guides. Help us out. And of course we do. Oleksij Rak: So what's like, mentioned like few different layers of service that you are providing. So it's like helping out with governments, helping out with cashflow finance, like ⁓ you do that. You are coaching them, you are a psychologist. ⁓ what else do you do? probably what's the main, is there a main service or are you just like solving the current problem? So. Craaig Aronoff: Well, again, it's not just a current problem. It can be a very term kind of view. No, we don't come up and say, here's our product or here's our service. We say, we help families who own and want to transition them to the next generation. Where business and family comes together, that's where we serve you. And we say to them, you are unique. You know, if you're looking for a quick answer, go find somebody else who'll give you a quick answer. That's not what we do. We under we work to understand you. We work to understand your goals. Uh, in the case of the New York times, there was a Pulitzer prize winning book written about the Oxberg, the Ox, the Oxlisberger family, the owners of the times. And the same people wrote another book about, uh, the Bingham family that owned a newspapers in Louisville, Kentucky. which you and they use a different family business consultant. And I asked them, what's the difference between the other family business consultant and us. And they said, the other family business consultant came in and told them what to do. And you came in and sought to understand what they needed. So that's what we do. We come in trying to understand what's needed without the notion either that we know it in advance or that we have the answer in advance. Now, We have enormous experience that allows us to fairly efficiently gather the information. don't do, know, we understand the business. Sometimes we'll get into strategic planning because it involves the goals of the owners. But ⁓ we don't into the technical aspects of operations. You know, we're in there telling them how to improve productivity. We get into succession because it involves family members. Oleksij Rak: I'm very you Craaig Aronoff: or non-family members who were moving into leadership positions. are a number of clients where they were making the assumption that a family member would move into a leadership position, but as it turned out, they didn't have anybody that was qualified to do that. And I had to help them understand that it was appropriate to identify the right non-family executive to move into that role. But again, I didn't go in saying, Oleksij Rak: Okay. Craaig Aronoff: You know, you need to do this. It was, let's understand what's going on here. I had one family. This was one of these fourth generation 200 member families and they were doing succession. They had five candidates, all family members to be the next CEO. I interviewed everybody, worked through everybody and everybody told me the next ⁓ CEO going to be a family member. And, I to what every single one of the five of them said. And what each of them said to me in different ways was. Oleksij Rak: you you Craaig Aronoff: I'm the least worst, therefore I should be the next leader. And I got up at a family meeting before 200 and I said, the FAF candidates have said to me that each one should be the leader because they're the least worst. That's not how you choose a CEO. And we ended up choosing their non-family chief financial officer to be their next CEO. He ultimately wound up as chairman. And then about 15 years later, one of those five had developed enough to become Oleksij Rak: Yeah. Craaig Aronoff: a successor and a successful CEO. So, you know, I cannot go in, they cannot come in and say, help us pick among these five, because I would come back after interviewing them and say, none of them are qualified, let's figure this out. In the meantime, I had to totally reform their board. They had, ⁓ it was such a huge number of family members, they had board with 20 people on it. And of them were family members. And they were voting in blocks their family member among the five to be the next CEO, which is why they couldn't get consensus ⁓ who ought to be the next CEO. So in the meantime, they said, not only do you have a succession problem, you have a governance problem. And we ended up tearing down their board, removing the majority of those board members from the board, shrinking the board, bringing independent directors onto the board. Oleksij Rak: I So. . Craaig Aronoff: and ultimately making that CFO non-family chair of the board. Now, again, they hired me to help them choose among the five and it turned into a much more comprehensive job than that, that affected everything. I didn't tell them how to run their business. I tell them that their accounting was not right or their estate planning. So there's plenty of people that are there to help them with the finance. There's plenty of people there that can do operational consulting. Oleksij Rak: Okay. Craaig Aronoff: There's plenty of people even that can do strategic consulting, although they don't always take into account ownership goals because they don't take time to figure out ownership goals or whether there is alignment of ownership goals. There's plenty of attorneys out there to do shareholder agreements. I don't do shareholders agreements. I read shareholder agreements and I sometimes learn that they're totally wrong because again, the lawyers pumped out a shareholder agreement instead of understanding what it is that the Oleksij Rak: you So Craaig Aronoff: the owners of the business wanted to have happen. So I would have two brothers, it's not a giant business, got their shareholder agreement, six months later called me in to help them talk about some other issues. I read their shareholder agreement and it said that one of them died, the other would buy them out. Simple, straightforward, normal shareholders agreement. But there were children in the business ⁓ If one of them passed away and their son was set up to be CEO, his uncle would end up owning the whole business and he would own nothing. And I said, do you want to be CEO and not own anything and just work for your uncle? And he said, no. I said, well, that's what your shareholder agreement obligates to have happen. And then I talked to their respective wives and I said, You know, do you want the cash or would you rather continue to participate in the growth of the business? And they said well You know, we're pretty okay as it relates to cash. We'd like to continue to own I said, well, here's your shareholder agreement. It says it won't do that I said, how do you feel about your brother-in-law? What if what if your husband died and it was your brother-in-law running the business? How would you feel about that? And both of them said great. I completely trust my my brother-in-law. So I went back to the attorneys and I said ⁓ didn't get this right. This is not what they want to have happen. And ⁓ rewrote the shareholders agreement. Now, I'm not an attorney, but are the kinds of things that we may well get involved with if we're dealing comprehensively with all of the documents ⁓ and of the agreements and all of ⁓ the plans and the financial plans and everything they can offer me about their family and their history. we can get a true understanding of what's going on and help them move forward. And all their other advisors help them forward. We're not trying to replace their other advisors. Sometimes we'll tell them that they need to replace an advisor because they're not very good. But generally, we're to help the advisors advance their client's interests. Oleksij Rak: And like 3500 over 32 years, it's like more than 100 years. And since all these deals are long deals, all these clients can last for years. How many do we have in parallel? Craaig Aronoff: Yeah, at any given time, at any given time, we probably have 300 or more clients active. Oleksij Rak: Wow. And some of them is like 200 people. How do you deal with that? Craaig Aronoff: Great. And tens of thousands of employees. mean, frequently these businesses will be the heart of their community and they'll be supporting their churches and their museums and their industries. you know, we feel like we're making a difference in the world and it's a great feeling. Oleksij Rak: But how do you deal with that? You have a team of like, your website, it's like 40 to 50 people of... Craaig Aronoff: Well, each each consultant has their own clients. So they're each consultant has their book of business and they may be taking on a client individually or they may be doing it in teams. And it's up to them to decide whether they want to go in as a team or not. I've been particularly sensitive to that because I'm I'm virtually retired. I'm working on my last cases now, but I've been bringing other consultants in with me. Oleksij Rak: Okay. Craaig Aronoff: so that they can continue to serve the clients ongoing after I've retired. So ⁓ ⁓ all of our consultants are independent contractors. They all are tied up with our organization with about a 20 page agreement about ⁓ the and how they work and how they work with us. Our staff works with the consultants, supports the consultants. you know, helps them with IT. have enormous databases. A part of what we do is generate intellectual capital. A big of what we do, for example, is if one of our consultants is out there working and gets into an interesting or a strange or a different kind of situation that they're not familiar with, they'll get on there on our internet and send a to all the other consultants. And within 24 hours, they'll get a half a dozen to a dozen at least responses from their colleagues about, I've seen this kind of situation. This is what I did in that situation, or have you thought about this or that? So we're always supporting each other and we're always available to do that. And I'm happy to say that, you know, ⁓ don't know of an example of where somebody typed in a question and didn't get ⁓ response from their colleagues. We have a very strong corporate, we're located all over North America. Oleksij Rak: Okay. Craaig Aronoff: literally from from Santa Domingo Dominican Republic to Vancouver but but we're always interacting with each other via the internet which is you know we didn't do that in the in the 80s and 90s obviously we all get together four times a year we have a meeting coming up next week and we all attend we call that our virtual office building So we're always there to support each other. always there generating more business. People in our firm by being great consultants, by being able to generate business, by being able to provide leadership within the group, and by providing intellectual capital, ⁓ which shared with the group. So we have this wonderful culture, strange culture, where we eat what we kill and share generously with each other. Oleksij Rak: you I'm sure you'll this week. I'm going to work free and corporate media, and I'm be a lot and corporate media, and I'm going to doing a free and I'm going of on the free and corporate free and Craaig Aronoff: And, you know, nobody's there protecting their clients from their colleagues. Everybody's there sharing their clients and their knowledge with each other. So that's tremendous support. ⁓ It's informal. these quarterly meetings, we do case studies. We share with each other. You know, we say, I've got these kind of issues. Can you discuss it? Or I had this ⁓ that I think would helpful. I'll share it with you. And we use these meetings to support each other and support the organization and then the organization does all the billing and and and all the back office and and and all the The PR and all the other kind of work needs to be done to support the firm as a whole And have a CEO and a full staff That is devoted exclusively to work. They're not consultants. They are employees of the company. So there are a lot of ⁓ Oleksij Rak: So. Craaig Aronoff: law firms and accounting firms where, you know, one of the accountants or one of the lawyers is the CEO the firm and they're doing their practice and they're running the firm, well, our people who run the firm run the firm and they are not consultants. They support the consultants. Oleksij Rak: Awesome. That should be a huge back office to support all this. All this operation. Yeah, hundreds of customers. Craaig Aronoff: Well, it's bigger than I think it should be. I used to be very low. kept overhead very low for many years. And now that I'm no longer the one that's running the show, they've expanded the back office. Good for them. ⁓ They've expanded the business to pay for it. So it works out. Oleksij Rak: Awesome. Awesome. Yeah, that's great to hear. terms of the about what's happening on market, you've seen market change through three decades. ⁓ That's a So, ⁓ what do see the market moving today? Because market is really changing rapidly with AI, with generative AI, with trade wars, financial crisis. You know, it's rapidly changing. At least my firm is. Craaig Aronoff: Yes, yes. Well, first of all, the client base is still the client base and the client base is still expanding because it's still discovering it has the needs that we serve. Our challenge continues to be finding people who can do this work and finding people who need this work and connecting them with each other. Now, having said that, knew how to start this firm back in the 80s and ⁓ and I was extremely good at marketing and public relations, old media. I wouldn't have any idea how to start it today. And it's much easier ⁓ for some who frequently doesn't know what they're doing or have any experience to present themselves through the internet and through as somebody is being experienced and able. Oleksij Rak: you Craaig Aronoff: and a worthy competitor. So part of it is we have all these entities cropping up that want to compete with us. Fortunately, we have our reputation and our experience, and most of them don't. So even with AI, they don't get it. The pandemic taught us ⁓ the to which we could do this via Zoom. So ⁓ we're traveling than we used to. Oleksij Rak: So. So. Craaig Aronoff: which is good for our clients because they don't have to pay for all that travel. And I distinctly just as a pandemic happened, having a new client, we kept waiting and waiting and waiting until it was over, till we could start the assignment. And finally they said, no, we need help. Let's try this by Zoom. I was skeptical. It worked. And so we have the instrument of ⁓ Zoom and progenitors. Oleksij Rak: So we a lot that are in work we do. We have a of people that interested that we do. We have a lot of people interested about the work do. We have of are interested that we We have lot of in Craaig Aronoff: to help us with the work and we do it. It's hard to have meetings with 200 people on Zoom, but it's not that hard to have meetings with a half a dozen people on Zoom. So we have lots more interviews and lots more small meetings on Zoom than we used to, and that works out fine. As I said, we use the internet extensively. I think we're using AI more. Oleksij Rak: like I think we're using AI in the first place. But you know, we are like, we're gonna be able to do the AI. So, and again, with the recognition, I think we are in a bit of a ballpark. And so, we're be able to do with I we're be able to do this with AI. So, I this ⁓ Craaig Aronoff: But you're my third interview this week, and I'm still old media. So again, with a reputation, I think we are in a bit of a bubble as it relates to the impact of the new electronic forms of AI, et cetera. ⁓ AI has not gotten to the point where it can interview in a meaningful way. Oleksij Rak: Okay. Craaig Aronoff: you know, or 30 family members and and process that information in a way that helped them establish the processes structures and decision making that they need to do. So what we do is I think ⁓ somewhat protected from new media. ⁓ How we it is protected from the new electronics. AI ⁓ is a that can help us write reports. ⁓ Oleksij Rak: So, one thing that we need to is to have protecting the And then we need to have a person protecting the road. And then we need to person protecting And have a person the road. the road. And And And And And then to need to have a person the road. person the And And then need to have road. And person the road. And Craaig Aronoff: and keep our databases better organized and things of that nature. So it's a benefit to us in those respects, but has not yet had a fundamental impact on our business, how we do our business, how we go to market. Again, we use the internet extensively to promote ourselves and we'll have people that say, rather than saying, I to say, if they hear us make a speech, read one of our books. Oleksij Rak: you Okay. Craaig Aronoff: have a friend in the industry that have used us, realize they have our problems, then they'll call us and hire us. And typically they did, and they typically didn't other bids, they just hired us, which was lovely. Now they may just find us on the internet and give us a try. And when they do, they'll find some others. But if you Google right now who are the best family business consultants, ⁓ we will probably come up as number one. Oleksij Rak: Okay. . Craaig Aronoff: And most of the rest of the top 10 will be giant companies like Ernst and, know, EY and, and, and, and big family, big, ⁓ business service providers, that, they may or may not want to engage with. So, you know, we, we are still small enough so that they feel like, we're going to be dealing with not an institution, but real people who are going to be really focused on our needs. Oleksij Rak: you Craaig Aronoff: And that's our big differentiator is that we are serving you, we understand you, we are understanding your goals, we're helping you understand your goals. there few others ⁓ and not a machine that can help you do that. Oleksij Rak: Yeah, for sure. AI can certainly not do that. At least foreseeable future for me. But can help you a lot in day-to-day operation, like formalizing, email, whatever. A ⁓ lot of stuff can be automated and improved. Like, and coming to improvement, you know, like understand you, you're getting out of operation because you're about to get retired. ⁓ still, if you could fix like something in your company's operation, what would it be? Because you like mentioned, you are scaling quite a lot. You're getting new customers and, ⁓ ⁓ with clients that have like a few hundred people that you need to deal with, there's quite a significant operation, I would say. Craaig Aronoff: Well, it is, but again, it's the individuals that are dealing with their own clients primarily. So we've got, you know, we've got billing systematized. We at one time were international we had ⁓ in Europe and Israel and Brazil. And it got too complicated. you know, currency exchanges and time differences. And we decided we would be, we would serve the world, but we would do it from North America. And we haven't changed that. Oleksij Rak: Okay. Craaig Aronoff: And ⁓ guess arguably you can take another look at that, but we've got plenty of business the way we're doing it. So we're not worried about that. I would take another look at our overhead and see if we really need all of those people ⁓ up. But up the current group. And ⁓ again, our challenge is finding people who can do the kind of work that we do. So we are out there and we're out there on the internet saying, Oleksij Rak: You So. Craaig Aronoff: You know, we're looking for good people. Here's what they look like. Here's what we do. And then we have to ⁓ cull through those people to make sure we, we get the right one. So biggest challenges are the same that they always were, which was finding enough to do the work that we do because we have a continuous flow. And because each time we bring on a new person, they also bring on clients. They also bring on their own marketing and sales efforts. So. Oleksij Rak: . Craaig Aronoff: What happens is they join us, they access all those people that are just calling us and saying, I need a consultant. And then we have people that are saying, let's understand you enough so that we can figure out who among us would be the best for you. So all these new consultants are getting more work than they ⁓ used to get. getting their marketing through us in addition to their own efforts. back office work is ⁓ off their shoulders. So they don't have to do billing. They don't have to go chasing delinquent invoices. We all that sort of stuff. We have person who's, we get constant for interviews. And we have person does our PR and who will call one of our consultants and say, would you like to talk to the Wall Street Journal? They say, well, yes, of course. I'd like to talk to the Wall Street Journal. ⁓ I typically now refer the requests that I get because I'm not trying to find new business, but I'll send it in to our PR person and say, you know, give this to somebody ⁓ reputation needs enhancement by being quoted in ⁓ media. so, you know, there's a lot of services in ways, the consultants themselves are the primary clients of our consulting firm. Oleksij Rak: Okay. So So. Craaig Aronoff: And then their clients their clients who we also help them serve. So it works out. ⁓ when we hit 20 consultants, it was struggle to manage the back but we've not got that figured out. So I think we're scalable, but we're not enticed. We constantly ⁓ request from all the world who want to license our name or become franchise oars. Oleksij Rak: So. So Craaig Aronoff: or franchisees of the family business consulting group, and we turn them down because we don't have any quality control ⁓ as it relates to that. So from the very beginning, we were not trying just to scale the business. We were trying to build a business that would best serve clients, and we wanted to serve as many as we could, but not to the extent that we were just trying to build our own wealth by scaling the business. You know, we've done a good job of building the business. It's a very, it's a nicely profitable business. it has given good returns to its owners. have a succession of ownership. ⁓ ⁓ once one of the consultants has reached a certain level in terms of their productivity, their leadership of the, ⁓ the firm, their contributions to intellectual capital, they're invited to join ownership. They buy in, over time. And then like me. Oleksij Rak: . Craaig Aronoff: When it's time to retire, you're bought out over a number of years. And we now have good experience with that. And I have two years left of my buyout and they're paying up nicely. there's problem with that as well. So we figured out how to do what we do. We continue to do it. We don't try to do things that we don't do. We're looking, ⁓ most our clients have ⁓ owned operating There's family offices that are out there. Oleksij Rak: Okay. ⁓ Craaig Aronoff: that basically operate as sort of banks or trust companies for their families. We focus more on operating businesses, but we're doing more work with these family offices. So we're expanding our market a little bit, maybe 10 % by ⁓ being mindful about seeking those clients. But we're not saying, gee, we do the family business consulting here. Oleksij Rak: . Craaig Aronoff: why don't we do their operational work or why don't we do their strategic planning or what, you know, we're not trying to expand our services. We do what we do. We do it well. And it's kept us extremely busy and we still have more demand than we can handle and we still need more people to help us do it. So we're pretty happy where we are. At least I am, but I'm retiring. So what can I say? Oleksij Rak: Yeah, like sounds like you depend on the team of superstars or that you built a team of superstars who like handle this. level of problems plus you build the back on back office which is too big already. ⁓ Craaig Aronoff: Well, and you know, I would hesitate to call them all. They're pretty, that's fairly accurate since you said it. So we don't always get it right. know, finding them is hard. And sometimes we will bring them into the firm and they won't be superstars for any of reasons. So, and we have to flush them out. You know, so those are challenging. But again, we've been doing this for 32 years. We've ⁓ done all things. you know, many, many times. And we've made mistakes and we found ways to overcome those mistakes. And on the 25th anniversary, I wrote a book on the firm and gave it as a gift to the firm. got, I think there were 22 of my colleagues that contributed to the book. So we called it the Family Business Consulting Group and Autobiography. That is to say a book that we wrote about ourselves and Oleksij Rak: Okay. So. Craaig Aronoff: And it's a guideline, know, it's a path forward still seven years later. despite all the changes in the marketplace and all the changes in technology, we should embrace those and use them for what they're worth and understand what we do and do it well and keep doing it. Oleksij Rak: Yeah, the way, amongst your customers, are ⁓ many ⁓ customers? You quite a lot of real estate, ⁓ media, clients, but is there anybody from technology ⁓ or it too young yet? ⁓ Craaig Aronoff: Media content. I used to be an expert in newspapers now there aren't any. mean, literally I had 15 or 20 newspaper-owning families and three or four of them still own newspapers. So, you know, I get to preside over the death of industries, which is not fun, but is there. So, yeah, you know, there plenty of businesses that are still out there. ⁓ Consolidation actually is more of a threat to family businesses than is technology. So, you know, there used to be thousands of little grocery stores and now there only a few because they're big chains. Some of which, by the way, are family businesses. ⁓ But the normal evolution is from, you know, hundreds and thousands of smaller businesses ultimately consolidating into a few larger businesses. Oleksij Rak: Mm-hmm. Okay. Craaig Aronoff: ⁓ So there's a constant churning and capitalism has created destruction and that's the way it works. We have software developing family businesses particularly, ⁓ which is one area where technology is there, although AI may kill software development too as we go forward. Oleksij Rak: Okay. Okay. Craaig Aronoff: technology companies or giant technology companies. And some of them are still dominated by their original entrepreneur and in some cases are moving toward being family businesses. But for most part, there's not there. there are hundreds of millions businesses out there in all sorts of areas. they're all going to, and the family. Oleksij Rak: So. Craaig Aronoff: is still the basic fundamental economic building block of society. there are going to be clients out there for us. ⁓ really not the issue. And as I say, it's them discovering that there's somebody out there that can help them with these family slash business issues that really understand and really can, it's not their lawyer, it's not their accountant, it's not their financial advisor, it's not their insurance provider. It's not a psychologist. It's somebody that sort of brings all those things to the table at the same time. So that continues ⁓ continues to work. Now, there are generational changes. ⁓ Do children, does the second generation or the third generation have the same issues as the first generation or the second generation? And do they access the marketplace in the same way? And the answer to that question is no. Oleksij Rak: Okay. Craaig Aronoff: You know, they're on the internet. ⁓ Oleksij Rak: That's what I wanted to ask is quite often innovation is like it happens on the change of generation because like one generation was seeing one way the other generation sees it quite different way market changes and then there is change like through the change of generations, there is a change in business and how does it play out in terms of governments, governance versus innovation. Somebody wants this table, the father wants this table, but the children want to change it. Craaig Aronoff: All of that is- All of that is true and we are typically heroes to the successor generation. You know, we're the ones that are telling the old guys they need to move aside. We're the ones that are saying to the old guys, know the way it used to work? I used to, when I first started, I'd get clients who, fathers would come up to me and say, I got this good business and my son is in the business and frankly he needs a little work, can you help me? And then the son would come up and say, I'm in this business, it's a good business, but I can't get the boss to buy a computer. and the boss is my father. So, gotta get the boss to buy a computer, whether understand the computer or not. I know the boss has to buy computer. So we're in there working with the next generation and usually very closely with them so that we've typically established a relationship with the next generation, helping them work together with each other and separating themselves from their parents, including all the strategic questions that they're asking. You know, we need to change the business this way. Do we need to take these risks? How do we evaluate entrepreneurial efforts by this brother that wants to go out and start this kind of business that's really unrelated to what we do? You know, do we finance him? Do we not finance him? How do we make those decisions? Do we say yes, because he's our brother? Or do we act like venture capitalists to make him go through, jump all the hoops before we're going to fund it? And the answer is make him jump through the hoops before you fund it. ⁓ But so we're frequently establishing the relationship with the next generation. And that's why we can have clients that go for 30 years and for three generations. The younger, if I've got a group of siblings or cousins who are arguing with each other and they go, there's got to be somebody that can help with this family business crap. business consulting, put it in. And who pops up? And ⁓ they're going to contact us or not. Oleksij Rak: . Craaig Aronoff: ⁓ Trade associations aren't what they used to be. All the avenues of reaching the client that we use so successfully in building our company are not as strong as they used to be. internet ways have substituted, know, are we doing podcasts? We're doing podcasts. Everything we're supposed to be doing to promote our company via the internet, we're doing it. I'm not doing it. Oleksij Rak: you Craaig Aronoff: But my younger colleagues who know how to do these things doing it. So, you know, we adapt in those ways. Now, to me, old guy, that's just a superficial change in how you use technology to go to market. And fundamental idea is ⁓ you to reach your client where they are in a way where they can say, ⁓ I have that need and there's somebody who can help me. I need to be in touch with them. So, and then it's just a question of how you do it. And then that's where you're technology of how to do it comes in. So the world has changed, but also it hasn't changed. Oleksij Rak: Yeah, remain families. Yeah, usually like my question would be like, where do you see your business? Like, what's bets are about the future? where you see a business in half a year years time, but from what you understand, it's just stable. Are you making any bets about the future? Craaig Aronoff: Well, from my perspective, yeah, one of the, I have a single worry and this is not a big worry, when John and I started the business, we committed ourselves for everlasting independence. You know, we are independent. We do what we do. We don't get hooked up with an accounting firm or anybody else that says, well, gee, ⁓ we're doing their tax work, we can do this work too. You know, because then, then you may compromise the consulting work. to make sure you still get the tax work. We don't believe in that. We get constant offers of entities that want to buy us, including giant, you know, the big four accounting and the largest consulting firms, insurance companies that do human resource consulting and things of that nature. And we are still, after 32 years, committed to our independence. We have set it up so that Those who buy into the business get a good but not great return on their investment. Somebody could come in with a really big number that could tempt our owners from ⁓ commitment to being independent. So I have a slight worry that our owners someday will say, wow, I can get a big payday. Let's sell out. And that could happen. And if it happened, I would just say, well, we had a good run. Oleksij Rak: you Craaig Aronoff: ⁓ And I don't think it's imminent. I don't think it's going to happen. You know, we continue these quarterly meetings for everybody. We pay for everybody to come. It costs us hundreds of thousands of dollars to do this every year. And there's no question that we should be making that investment in ourselves on an ongoing basis. So I'm ⁓ that my successors are still committed to carrying the business forward. And why not? It's a great business. ⁓ Oleksij Rak: So. So. Okay. Okay. Craaig Aronoff: People on an individual basis are billing numbers that amazed at. Just And they're making very good livings both as and as owners, those who are owners, as owners of the business. I recognize how unusual I am, or we are, to be ⁓ as blissful as are as we face the future. intimidated or threatened by the changes in the marketplace, in part because family businesses have been here forever. You go to the old Testament and see Jacob and Esau fighting over their father's legacy. So this has been going on for thousands of years and it's going to go on for thousands of years. And there's going to be all sorts of niches in the marketplace that families are ideally suited to serve or assets that families are ⁓ real estate. Oleksij Rak: So. So. ⁓ Craaig Aronoff: that families are ideally suited to own. So it's gonna continue, it's gonna be large. the opera, sometime I guess, though, we'll fill up the market, but we're a long way from that. So, you know, I think we're good for at least another generation. If my successors can keep it together and keep doing what we've been doing at the level that we've been doing it. Oleksij Rak: Okay. Okay. Craaig Aronoff: will persevere ⁓ gladly happily and proud. Oleksij Rak: That sounds awesome. That's a great story that you told. Craaig Aronoff: Well, thank you. enjoy telling it. I appreciate you giving me the opportunity to do it again. Oleksij Rak: Thanks a lot, Craig. Is there anything you would like to add before we wrap up? Craaig Aronoff: No, just that we pray for you and you prayed. Oleksij Rak: Yeah, thanks. Craaig Aronoff: Hope that we provide the support that need. Oleksij Rak: Thanks, I appreciate it. Okay, thanks for coming over and it was really, really pleasure chatting with Craaig Aronoff: My pleasure. Bye bye.