A do-it-yourself philosophy doesn’t always work in the world of finance

If you suddenly came into possession of a large income-producing piece of real estate or farm operation, could you instantly manage the day-to-day activities starting tomorrow to support the enterprise?

Not many can say “yes” to that question, and abrupt transitions of family businesses happen often enough where professional management services are needed quickly to sustain operations.

You could find yourself one day as the owner of these “special assets,” the kind of private business interests that are not easily converted to more liquid assets, like cash.

And these properties often require extra care in maintaining operations or preparing them for eventual sale.

In the case of a closely held firm, an appointed family member or trustee involved in a transition may be inexperienced in business operations and find themselves overwhelmed when held responsible for day-to-day business activities. They may not possess the industry knowledge to keep the business operating smoothly.

If this is the situation, it is important to put professional resources in place quickly to manage the enterprise to maintain the value of a property.

We have found over time that a “do-it-yourself” approach can be a challenge and missteps can cost families large sums of money. A professional special assets manager skilled in managing properties or ongoing businesses can have a competitive advantage over those without the specialized or appropriate skill set.

Mistakes are more likely to occur when there are many minority interest holders in a property. For example, a minority owner mistakenly thought her property was virtually worthless and sold her mineral rights at a fraction of what they were worth. By doing the homework and waiting just a little longer for the right purchaser, another interest holder profited immensely compared to his neighbor.

Another is example is a widow who was faced with the prospect of having to take over the operation of several thousand acres of farmland worth millions of dollars.

She had a deep empathy for the many long-time business partners who had been her husband’s key tenants. The wife decided to bring in an agent to assist her in reaching her goals for the property. Since all the interested tenants could not immediately raise the funds to purchase the parcels, another outside agent was brought in to list for sale and auction portions of the acreage. This created fair access to the pool of potential purchasers the wife desired.

The sheer scope of managing this process made it a complex job. In many cases, it’s simply too big a task for a single person or someone not accustomed to dealing with large-scale operations. 

The work in this field is incredibly diverse in scope and can include commercial properties and office buildings, farm acreage, and parcels with timber, precious minerals, or oil and gas assets, as well as closely held business interests.

We just like to remind property owners that they have options. It pays off for people to recognize what their strengths are and when it’s time to turn to a business advisor with broader expertise where appropriate.

Josh Hartman, CWS, MBA, is a Wealth Management Consultant at Commerce Trust Company in Springfield, Mo.

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