Planning for the future: developing the right ownership strategy

Franco Frattura: If you or your family own a business, an ownership strategy helps you to define the goals, values or vision that you as the owner want to pursue with your company. In contrast, the business strategy outlines the objectives and vision for the company itself.

The ownership strategy takes private development and direction into account and combines them with long-term business planning. Especially for families who own a business, the ownership strategy is crucial to ensuring stability, avoiding conflicts and leading the company successfully across generations.

According to Frattura, the ownership strategy defines which goals you want to achieve with your company as an entrepreneur on the one hand, and as a private individual on the other. When elaborating the strategy, you will inevitably also consider how to align your personal and business goals. I recommend also taking this opportunity to define your personal value system, which will guide you both privately and professionally.

This fundamental clarity helps with strategic decisions and serves as a reliable guideline for your family and employees of your company. The development of the ownership strategy begins with clearly defining objectives, formulating a shared vision and establishing core values and guidelines. The owners’ interests are set out concretely and translated into strategic areas of action that provide long-term orientation and a framework for decision-making.

You should do so as soon as possible, so you can calmly think through scenarios that, sooner or later, become key moments in the life of any business.

One such key moment is business succession. But you shouldn’t wait that long. Close alignment of personal and business goals is needed earlier – for example, when starting your own company or when major investments are on the agenda during the growth phase.

Suppose you want to retire in five years – this will be the key moment for your ownership strategy. You’re required to make decisions regarding both business succession and your personal wealth and estate planning. Both aspects have major consequences for your future and should be carefully planned and prepared. We know which issues need to be addressed before, during and after the sale from experience, as we have already guided countless entrepreneurs through this phase.

That’s why it makes sense to benefit from our support – for you, it will probably be the first and only time you sell your life’s work and retire. We’ll advise you on which goals are realistic and help you achieve them. Let’s embark on this journey together. It usually starts with getting your company ready for sale and continues with investing your new assets according to your intentions – with a focus on your values and your personal ownership strategy.

Those who believe they can do without one are confusing cause and effect, because ideally the corporate strategy is derived from the entrepreneur’s own strategy. Above all, however, it is often one and the same person who owns and manages the company and is the sole member of the board of directors. They have their strategy in mind at all times, but it is only when it is put in writing, and where necessary also communicated, that it gains the necessary binding force in both business and family life.

The ownership strategy is always of great importance, but especially so if you hold many roles in your company. For example, if you’re simultaneously the owner, a member of the board of directors, managing director and perhaps even a trustee of the pension fund: You’ve invested your private assets, and so your company’s capital still belongs to you as a private individual. And even if you think about your business 24/7, you still have a private life; your private and business interests are often completely different. To put it bluntly: Your personal goals could even harm your company.

This is precisely why an ownership strategy matters so much. Even if a company has several shareholders, the benefits of an ownership strategy are clearly evident. I often encounter this situation with two types of companies: firstly, in family businesses that have grown over generations, whereby the shares are distributed across many branches of the family. And secondly, in start-ups with multiple co-founders and external investors, as well as correspondingly complex ownership structures. In both situations, written ownership strategies are not just nice to have, but a must – the same as truly watertight shareholder agreements and property and inheritance arrangements.

Suppose you founded a company ten years ago and have since invested all your money and energy into your “baby”, which you’re now planning to expand abroad. However, in the meantime, you have started a family and the dream of owning your own home is becoming a reality. Unfortunately this house purchase is not in the interest of your company, which needs additional equity for the planned expansion. Now you’re faced with a dilemma: Should you buy a house for yourself and your family and save money for the long term – or use the money to enable the next step for your company?

The scenario “acquisition of residential property” is not entirely farfetched and should have been on your radar much earlier – namely when developing your ownership strategy. You could then have considered possible timings, financing options, courses of action and so on. You might have stipulated in the ownership strategy that home ownership takes priority, provided your company is not experiencing liquidity difficulties at that time. Or you might have ranked expansion as your first priority and buying a house as the second. The purchase of the house would then have been scheduled for a time when the company had generated a certain amount of available liquidity.

You cannot prevent conflicts of interest, but you can manage their consequences. As you consider all possible contingencies when developing the strategy, you will develop and document solutions and courses of action for the most likely scenarios early on. The better prepared you are, the less harm will be caused by these conflicts of interest. This way, you not only protect yourself from harm, but also from shattered illusions and tough wake-up calls.

In short: Those who identify risks early can manage crises better and safeguard their ability to act. This includes clear governance structures that define responsibilities and decision-making processes, as well as robust contingency plans. Both give you something you can reliably count on in everyday life and exceptional situations, and turn your strategy into a flexible tool that works even under pressure.

I recently had a conversation with an entrepreneur. “By the age of 55 at the latest, I want to sell my company and just enjoy life,” he replied when I asked about his goals. Having a goal is only half the battle; without the ability to make it happen, all the will in the world is useless. Has he calculated how much wealth he needs to be able to live off it for the rest of his life? Does he have an exit strategy for withdrawing non-essential business liquidity and assets from the company without incurring high taxes? Has he considered whether a thinner equity base might reduce the attractiveness of his company to potential buyers? The ownership strategy should provide well-thought-out answers to these questions.

I can only guess. The main reason is likely that true entrepreneurs tend to forget their personal interests – and these can sometimes be at odds with their business goals. I often hear people say they don’t want to schedule their private lives as well. Some do not know what belongs in an ownership strategy or how to proceed. And still others do not know that there is such a thing as an ownership strategy or that they need one.

We usually begin the conversation by taking stock of your current situation: your life circumstances, finances, company, family, intentions, foreseeable changes, commitments, goals and so on. To provide you with sound advice and support, we need to gain as comprehensive an understanding as possible. I say ”we” because this situational analysis usually involves both UBS Wealth Management and the Corporate Clients division. This is essential because your personal assets are largely invested in your company – the company is your asset.

As the world’s largest asset manager and the leading bank for Swiss SMEs, we provide comprehensive support to entrepreneurs and their companies. If you are both a private and corporate client of UBS, we can tailor our solutions to fit both your personal and business needs. Together with our teams of experts, we support you and your company and examine key questions regarding your future with you. We can advise you on strategic decisions and support you with implementation.

Taking action and getting things done is in the nature of entrepreneurs. I would be pleased if more and more people would think about their ownership strategy at an early stage. Having to tell a 70-year-old entrepreneur that his company is worth much less than he imagines, and that the proceeds won’t allow him to live comfortably for another 20 or 30 years as he had hoped ... That pains me deeply. That’s why I would like to emphasize once again, in no uncertain terms: An ownership strategy can never come too early – but it can come too late.