Written by “I would not give a fig for the simplicity this side of complexity; but I would give my life for the simplicity the other side of complexity.”
Supreme Court Justice Oliver Wendell Holmes
Doug Marshall – August 13, 2020
There are easy problems and there are stubborn problems. Stubborn problems are Wicked Problems. Planning Problems are Wicked Problems. Business Value Protection Planning is a stubborn, wicked problem.
In the paper “Dilemmas in a General Theory of Planning” Rittel and Webber (R/W) listed ten characteristics of Wicked Problems. In the August 11, 2020 post – Wicked Problems & Business Value Protection Planning the wicked problems are described as Complex, Messy and Unpredictable. We are going to look at each of the ten characteristics of Wicked Problems and examine them from the context of financial planning for the business owner. Once you understand business owner planning as a Wicked Problem then you can look for ways or systems to tame the Wicked Problem.
Characteristic #1 – There is no definitive formulation of a wicked problem.
What is business owner financial planning? Well you soon figure out after a few searches there are many ideas and opinions about the subject as to what it is. You probably have ideas of your own. Thinking logically most would agree planning is a good idea and no planning is a bad one. This is about the only thing everyone will agree on at the beginning, planning is good and no planning is bad. Yet not all planning is good if the planning is done without the context of the reality of it being a Wicked Problem.
Why is there no definitive framework for business owner financial planning? We can start by make a list of causes.
- There are many stakeholders with different ideas about business owner financial planning. There is the business owner(s), financial advisors, bankers, lawyers, accountants, partners, insurance companies, investment companies, investors and family members. All have their different ideas about planning and different ideas about solutions. All have different concerns and biases about how the planning can impact them and where they fit. Do you see the problem of just getting the planning process started?
- Solving one problem typically creates another problem to be solved. Let’s look at an example. A buy/sell agreement is created for two partners by their attorney. The agreement requires one partner to buy the other one out if a partner becomes disabled and cannot work in the business. By defining and solving one problem another problem is created. Where is the money going to come from to buy the disabled partner out?
- Every business is different even those in the same industry. I work with many craft breweries. They all make beer. Aside from making beer all other aspects of the business are different. There are about 9,000 Craft Breweries in the United States. I have yet to find two craft breweries exactly alike among the 300+ I’ve been in.
There is not definitive framework for business owner financial planning. It is easiest to give you a few examples from our experience and evolution at Marshall+Viliesis into how we work to tame the wicked problem of business owner financial planning.
- We changed “Business Owner Financial Planning” to calling what we do as “Business Value Protection Planning.” In short we Value and Protect a business owner’s most important asset. We tamed the vagueness of “Business Owner Financial Planning” by being more specific.
- Our planning always starts with a valuation of the business. If we are going to protect the value we need to know what the value is. It is an excellent place to start and it is a constant for all business owners. Business owners should know the value of their business and not just guess about it.
- We define the four business value protection areas for the business. They are Succession, Retirement, Estate and Key Stakeholder Planning. We define what each planning area does and looks like. The business owner and all the other advisors can agree or disagree about the four areas and what they should look like. The more agreement we have the more likely it is we will have a successful planning outcome. Don’t skip the step of defining what problems you are trying to solve.
- When the planning process gets bogged down or goes off on a tangent, and it will, we always come back to our foundational philosophy – The business is an owner’s most important asset. It is typically more than half of the total net worth of the owner and it is the primary income source supporting the lifestyle of the family and supporting the causes they care about.
These are some of the things we have done to tame the wicked problem. We constantly work to better define the problem, the objectives and the solutions. At the same time we strive to get all stakeholders on the same page. If you are a business owner you want your advisors in agreement working for your benefit to solve your wicked problem. Now we can start working on the problem.
We did not eliminate the wicked problem, we just tamed it a little bit with some structure and agreement. There is no definitive formulation of a wicked problem.
NEXT UP – Wicked Problems have no stopping rule.
You are invited to comment in this post or directly by E Mail.
Doug Marshall – DougM@MarshallViliesis.com
Peter Viliesis – PeterV@MarshallViliesis.com