Your Growth Plan… Organic or Acquisition Driven? January 29, 2014

1. Type header copy here. Your Growth Plan…Organic or Acquisition Driven?January 29, 2014

3. Member ProfileTony Roni’sand “Philly’s Big Comeback” Tony Altomare http://www.youtube.com/watch?v=6H0jk-2QLUg&feature=player_embedded

4. Member Profile

5. Member ProfileTony Roni’sand “Philly’s Big Comeback” http://www.youtube.com/watch?v=6H0jk-2QLUg&feature=player_embedded Tony Altomare

6. Member ProfileTony Roni’sand “Philly’s Big Comeback” http://www.youtube.com/watch?v=6H0jk-2QLUg&feature=player_embedded Tony Altomare

7. EXERCISE: Ownership Strategic Thinking What is your family’s long term wealth creation strategy? Harvest Strategy Growth Strategy Q. Does your ownership group want to be in harvest mode or growth mode? Discuss both scenarios. Q. Are you intentionally building new assets and value streams or are you milking old assets? Is this good or bad? Q. What are the issues and criteria for deciding if you are in a harvest mode…or a growth mode? Key Concept: “It is fine to be in harvest or growth mode as long as it is an intentional strategy and everyone understands the ramifications of your choices.” • Institute for Family Enterprising

8. Thinking Like Shareholders Define their unique function and clarify agency relationships Ownership Management Operations • Act within the functional categories • “Tease out” the functional categories • Create a distinct ownership function • Establish governance structures • Mentor successors in the functional categories • Plan transition within each of the categories • TELOS • Institute for Family Enterprising

9. Clarifying Roles & Responsibilities Family Ownership Group “stewardship” Ownership Legacy Shareholder Group “accountability” Foundation “service” Board of Directors “oversight” Top Management “directive” Shareholder Responsibility Employees “task” • TELOS • Institute for Family Enterprising

10. Clarifying Roles & Responsibilities OWNERSHIP Shareholder Group 1. Define ownership Values, Vision, Mission • Who are we? • Where are we going? • How do we get there? • Newspaper headline exercise. • Example: Cardone Industries 2. Create / elect management oversight structures • Empowered Board of Directors • Advisory Council • Association of Peers • Consultants

11. Clarifying Roles & Responsibilities Shareholder Group OWNERSHIP 3. Financial benchmarks and basic liquidity • Dividend Philosophy: 90% of profits reinvested • Growth Philosophy: Exceed industry standards • Profitability Philosophy: After tax net operating profit to = 5% of sales • Leverage: Debt : Net Worth not to exceed 1.5 : 1. • Sale: Must receive ownership approval to sell more than 25% of the value of the company. • Liquidity: Buy-sell agreement. 4. Family involvement policy • Compensation philosophy: Equality or differentiated compensation? • Employment philosophy: Entitlement or opportunity? • Family roles and responsibilities: What is the role of a shareholder in our family? • Conflict of interest policy: Outside activities and ownership? • In-law policy: Will in-laws be allowed to work in our company?

12. Organic vs. Acquisition-driven GrowthJohn Ratliff

13. Membership Value Proposition • Ownership-level Strategic Plan: Defining your shareholder agenda • Ideas that Impact: World class education • Next Generation Entrepreneurship: Skill assessment and professional development path • Peer based learning and benchmarking: Affinity groups and networking • On-line learning: Network for Family Business • Implementation Support: Ownership, Board, Management levels • Resources: Morgan Stanley, Price Waterhouse Coopers, Saul Ewing, Creative Financial, AUA Capital, SJU

14. Next time: March 19: Competing in a Hyper-Competitive Global Environment