Welcome to the Success Architect, where we don't just build homes, we build legacies. I'm your host, Jake Lewandal, custom home builder and coach. Each week, I sit down with builders and entrepreneurs who are ready to 10x their business, their health, and their mindset. This is where blueprints become breakthroughs. Let's get to work. What happens when a family business reaches a breaking point and doesn't survive? That's what I'm going to break down today. Welcome back to The Success Architect, episode two, Breaking Family Ties. What's up, guys? I'm Jake Lewandal, your host of The Success Architect, and I'm really excited to talk about my past with a family business with the intent to help every listener who is in a family business or is considering getting into one. Do it with success in mind. Relationships are hard. Business is hard. And when you put the two together, especially family relationships, it gets even harder, but let's try to break it down. Make it simple. Even if it's not easy, it can be simple and it can be done. You just have to decide if you want to do it. So where did mine start? Mine all started back in around 2014. As I had talked about in a past episode, I started out in construction and then I got into real estate. I always wanted to get into development. So I wanted to understand the sales piece of the business. And I was in real estate for about three years. And I had a friend come to me. He was a gym buddy, CrossFit gym. We worked out together and he came to me and said, Hey, I really want to build a house. It was a small house, nothing too crazy, but I did not have a construction company at the moment because I was in real estate and not focusing on the building side. But it seemed like too good of an opportunity to turn down. And I have trouble saying no, let's be honest. So I wanted to figure out a way to take care of him and start a construction company. My father-in-law was giddy to get back into the game. He had been in a semi-retirement for a couple of years. So my wife and I discussed it and we decided, hey, let's go chat with him. We discussed getting into business together. Our contract or how we got into business together was a napkin at a breakfast diner in Bozeman. We sat down one morning at 6.30 Wrote down some things on a napkin about how we were gonna do business together what maybe an exit would look like and what he was gonna do in the future and This is where it all started off on the wrong foot seemed like a fantastic idea but my problem was is I was not specific about my wants and he was very specific about his wants and But a lot of that did not get put down on our little napkin contract. So problem number one right there. Overall though, we started out, everyone had a fantastic time. We started with that one project, smaller house. We did some odd jobs for about a year, and then we ended up with two houses, one spec house and one custom home in a golf community in Bozeman. And that was kind of the launching point for the company. All of a sudden we were doing some real houses, doing some real business, and we were actually having a lot of fun doing it. He was the site guy and I was the office guy because I was also doing real estate. Uh, we ended up hiring some employees. Think about this time we had maybe six employees and everything was going great. Sometime around year two or so, my wife Mackenzie joined the company and started doing all the books and helping me with some of the backend stuff because it was getting pretty busy. And that decision was a great one for a little while. And what happened is there's usually a moment in the relationship in a family business where something breaks and the hill starts to go the other way. And this is the one. My father-in-law started talking to her separately from me about things that he didn't like I was doing in the business. And lucky for me, I have an extremely loyal wife and she stuck by me, but she stood up to him and said, you're not going to talk to me about this. You're not going to talk about Jake that way. And she said, she put an absolute stop to it. It actually happened enough that it got to the point where she said, Hey, if you don't apologize and stop talking like that, then I'm not going to talk to you anymore, personally and in business. And maybe that was a large step for her to take, but I'm honored by the loyalty. And it made a point in the relationship in the business that this was not going to happen. We were not going to be talking behind each other's backs. And it made it so that everything came to the forefront, which is exactly what needs to happen in any business, let alone a family business. So this went on for a year. It was really fricking awkward. I had to work with my father-in-law while my wife was in the business and helping us be successful. She wasn't talking to him. So I had to be the gateway for that. And it also put a lot of strain on the family business in general, just with, business having to continue on, and the fact that now we weren't going to dinner at their house and being a family anymore. It all kind of came to a head. Christmas one year, we decided to kind of drop it and just say, hey, let's be a family again. But that decision with not speaking to her father-in-law that my wife made, was the point that made it very obvious that we could no longer do business as a family. And thank God she did that. She put a line in the sand that was very specific, and it allowed me the freedom to then put a line in the sand and say, this is not going to work. So between she and I together, we decided to make a proposal to my father-in-law that we needed to not be in business together. The idea was to save the family, make it so that we could start being a family again, have dinners again, and have our dinners not be boardroom talks anymore. So we put together a proposal. The proposal included basically a choice of we can dissolve, I can buy him out, or he could buy me out. And it seemed like a great option. especially the fact that we were giving him the option to choose exactly which way we would go. So we made the proposal and this is where the relationship really started to be stressed because all of a sudden we all knew that we did not want to be in business together and but the business still had to continue on because it happened to be both of our livelihoods. And this is probably a point that most family businesses get to that are in turmoil. You get to the spot where, Hey, our, Hey, our livelihood relies on this going, but we're all fighting over here and it stops working. So what are the next steps? The next steps I found is taking action and putting forth the meetings to say, hey, instead of just shoving this under the rug, we actually have to talk about this. Even though talking about it absolutely freaking sucks. So it took us eight months from the time we made the proposal to actually getting to a buyout. And I had to drive the conversation. I had to continually say, Hey, come into the office. We need to talk about this. We have to move forward on it. And it's way too easy to just let these things slide when you're in a family business and you want to just keep running the business and shove shit under the rug. But it just keeps rearing its ugly head. So we, we met obviously many, many times over eight months, we actually ended up hiring a coach to try to help us get to a valuation that we would both agree on. And the way that I brought it, excuse me, delete that. The way that I brought it to him was that he got to choose if he wanted to be bought out or I got to be bought out after we came to the amount. It seemed like a fair thing to get him to the table in order to help us make a decision. At the end of the day, after a lot of negotiations, we decided on $125,000 for the business. The business was only doing about 2.8 million a year at that point. And this is where we came to as a fair spot. I was 26 years old and to be honest, I had about $0 to my name besides the house that my wife and I lived in. So$125,000 was not coming out of my pocket if I was the one to buy him out. And that's where we ended up. He decided he wanted to be bought out and he did not want to take the money over time. He wanted it all right then and there. I went and collateralized our house, got$125,000 and paid him out. And though it took a long time to get to that point, that was the end of the business as we had known it before. I bought him out. We had quite a tough scenario right after. He basically took the rest of the crew and left me with very few people, but we did have some great projects. And so I ended up rehiring over about two months, found a far better crew, and we kept building the company. After that, I ended up bringing on another partner and building the company to about 7 million and I sold out in 2020. So after hearing my story and some of the treacherous moments that I had to go through with family, by the way, I just want to state for everyone who's considering getting into a family business or already is in one, Unfortunately, paying the money for the business is not where it ended. Unfortunately, the relationship was so severed by that time that we no longer have communication with them no matter how hard we've tried. And it doesn't really matter whose fault that is. It's because of how the business went. It's because of how we had the communication about the buyout and how we got to the buyout. And really what that comes down to is that we did not have it set up from the beginning. So, that's what I want to talk about here. If, after all of that, you are still wanting to be in family business, then let's start with some items to set you up for success. Number one, define the relationship twice. We need to define the relationship in the family role and define the relationship in the company role. Now, I want to make sure that everyone understands you can't just rely on the fact that like, my family knows me. We need definitions for everything. Just like in a business, you need KPIs for a seat, which we'll talk about in a minute. But the family role is, Hey, are you a brother, a sister, a cousin? Where specifically are you? And what is the relationship with your partner? The company role is what seat you sit in. What specifically are you responsible for? Who do you report to? Etc. etc. These must be 100% defined at the very beginning before you jump in. Number two, write real job scorecards. Real job descriptions, real job scorecards that include responsibilities, KPIs, clear, done looks like this, so that absolutely there are no issues with knowing what your job success looks like on the business side. Then you can separate that from the family side. If this isn't formalized at the beginning, it's way too easy for the relationship with the family and the business to get co-mingled and Establish a non-negotiable communication rule. We speak to each other as teammates at work, not as siblings or cousins or partners, etc. And we speak separately and as family at family events. The two must be very well delineated and you have to have these non-negotiable communication rules in place so that the communication happens at work and happens with the family separately. Number four, agree on exit terms before you start. And this is the main place that I completely screwed up. We talked about somewhat exit terms with our napkin agreement, But I wasn't clear on it at the beginning and for what my father-in-law's clarity was, we didn't write it down. So four years later, nobody remembers what the hell we talked about and nobody knows exactly what we're supposed to do. So now you're fighting about it at the end is exactly what happened to me and exactly why the relationship was severed. Number five, prioritize the relationship over business. So this is where you specify your relationship as a strategy, not just a vibe. What I mean by that is if the business stresses the relationship, then we fix the system, not each other, which means you fix the process within the business while keeping your relationship alive. You're not trying to change people. This forces both parties to address process instead of personality, depersonalize disagreements, and stay aligned on the long-term relationship, both the family relationship and the business relationship, because family relationship matters and your livelihood matters. If you both commit to this principle, you can stay family and stay in business. If you stick to these five things, then you're going to have an excellent chance of success in a family business. But please, please, please focus on those five things at the beginning and think about the beginning with the end in mind. Losing the business wasn't the end. It was the beginning of who I actually became. I'm absolutely not telling you to not enter into business with family, your dad, your brother, your wife, your sister, you name it. Every relationship and family is different. And for so many people, it works out incredibly. That just wasn't the case for me. And it ended up working in my favor to ultimately end not only that business, but the relationship too. And that's unfortunate for my family and my kids. But if you start strong and keep close ties on the communication standards, the loop between you and your business partner, and always remember that family comes first, then you are looking at success in a family business. One of the things I did this week, I opened up my IG to some questions and I wanted to answer some of these questions on the pod because they related to family business. Before things got difficult, what were some of the early wins or moments that made you feel this is working? It was really, really fun, actually, for about the first year to year and a half. We talked multiple times a day. My father-in-law and I, we had ideas, we would talk at night, and it was just fun because we were growing a business. And every entrepreneur loves that startup phase. You know, we had ideas, we had all kinds of fun things to discuss that were leading us toward what we wanted. And we had fun doing it together. And that's probably why family businesses start in the first place, is you have a great idea. You have someone who you know very, very well, someone you can be open with, you can be honest with, and who most of the time you believe is going to be honest with you. It's a great idea at the beginning. We just didn't start it off right with all the specifics about the end. So do that. You're looking at success. How did the family dynamic shape the way the business operated day to day? The family dynamic actually worked out really well. It was nice being in business with my father-in-law instead of my dad because we didn't have a lot of the past. And I felt like more of an equal with my father-in-law. And to be honest, he helped me with that and he allowed me to be an equal, even though I was far younger, far less experienced. And at the beginning, that felt really good. As things started to deteriorate, that became an issue that came up between us. Experience level, age, how long I'd been in business versus how long he had been in business. And unfortunately, these are things that were always in the background. We just didn't talk about them. And those things that are in the background that don't get discussed come out when things start to get bad. What were the first signs that something was shifting or breaking beneath the surface? The first sign was my father-in-law talking behind my back to my wife. And she stood up to him and basically said, hey, I'm not going to stand for that. But I'd be lying if I didn't say things to her. She's my wife at home. You know, we all have things to bitch about on occasion, and he happened to be on my list. So we were both at fault in that regard. And as soon as the talking behind each other's back started, that is where the break started to happen. And that was probably at about a year and a half to two years out of the four. So it just starts a fissure and it widens and widens and widens until you can't come back from it. What was the hardest part of trying to run a business with people you love? At first, it was really easy. Like I said, it was like, because we love each other, we were there to fight for each other and to do well for each other. And we always had each other's back. But what made it really hard for me is I was not very good at speaking my truth and being authentic because I thought it would hurt the relationship. I didn't stand up for what I believed in. And that was because I looked up to my father-in-law. I loved him. And I also married his daughter. I wanted to keep a good relationship. And so when I started mixing those things up, it led me to a point where I was not being my authentic self. And that started to degrade the relationship and make it very difficult for us to communicate. Were there any non-negotiables or lines crossed that changed the relationship permanently? Just like I said before, the first line that was crossed was talking behind each other's back. And usually in relationships, whether it's business or family, the things that I see is that's usually the first place that a relationship starts to have, have friction is talking to other people about that person instead of talking to them directly. It happens in every business that I've ever heard of. It has happened in my business. And as a leader, I have had to try to sniff that out before it becomes an issue and have the confrontational communications in order to stop that and to get everyone back on the same page. And that's just something that has to happen. And when we can be our authentic selves and speak our truth to our business partners or employees or our owners, like anyone we are dealing with, then that is where communication starts. What helped you start rebuilding your life and identity after the business failed? So this was an interesting one. I, uh, a couple of things. Number one, I brought on another partner at that point in my life. Honestly, I did not have the confidence to run the business myself. And so I brought on another partner who was a great dude and he helped along the way. For me though, it was me taking the time to learn the things that I needed to do for me to feel confident. And that is why it's part of the reason I sold out in 2020 and started my own business because all of a sudden I was feeling confident. And when I went off on my own and did not have a partner, my confidence skyrocketed. That's a big thing. Confidence is huge in running a business or doing anything in your life, whether it's like a fitness challenge, a marathon, starting a business, having a tough conversation with your spouse. It all takes confidence and you just have to kind of nut up and do it. So rock and roll, get her done. How have the relationships evolved since the business ended? Unfortunately, in our case, the relationship is not there. There's still no communication. From our side, we have tried to open that communication up. And the other side prefers not to communicate and would like does not want to have a relationship. So that's where we are at. And I don't wish that on anybody. I hope that anybody listening to this who is in a family business or has been in a family business and ended it, I really hope that you can get past all of the issues and put it aside because love and family matters a hell of a lot more than a couple of dollars. And I hope that for everybody. Those are all the questions that I've got for today. If, uh, if anyone has any other questions, I would love you guys to reach out on socials, DM me, throw them in comments, anywhere that we're on socials at Jake Lewandal. And I am super excited for next week because I'm going to sit down with my wife, Mackenzie, who you heard a lot about. And we're going to talk about our life, our relationship, how this business breakup impacted us, and what role business has in our current life and relationship right now. Stay tuned, jump on, look forward to talking to you next week. Thanks for tuning in to The Success Architect. If today's episode helped you lay a stronger foundation for your business or your life, subscribe and share it with someone ready to do the same with theirs. You can follow me, Jake Lewandal, on social for daily tips on health, wealth, and building success that lasts. Until next time, keep designing,