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Private company owners strive for success but getting there is not an easy or straight path. I have been working closely with business owners now for more than 40 years, and I have been reflecting on the key character traits shared by successful entrepreneurs. These views are not based on peer-reviewed research but are gleaned from my vantage point as outside counsel.  The most significant traits that I believe help to determine success in business amount to CRAP: courage, resilience, adaptability and persistence. There is one more important letter – F – and I will share thoughts at the end about that one, as well. 

Courage Is Not Fearlessness, It’s Taking Action Despite the Potential for Failure

We all fail at times. There are no exceptions. Some failures are bigger than others. But what distinguishes successful business owners from those who fall short is their willingness to keep trying despite the risk of failure. The mindset of remaining unbowed when failure results is critical in seeking success. Many have given voice to this view. 

Thomas Edison: Negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t.

J.K. Rowling: It is impossible to live without failing at something unless you live so cautiously that you might as well not have lived at all, in which case you have failed by default.

Michael Jordan: I can accept failure. Everyone fails at something. But I can’t accept not trying.

In sports, two of my favorite facts are that players miss all the shots they don’t take, and a major league hitter who fails seven out of 10 times has a batting average of at least .300, which is often good enough for him to be installed in the Hall of Fame.   

Given the inevitability of failure at some point, successful business owners do two things.  First, they don’t shy away from pursuing challenges even though they know their business efforts may not succeed. Second, and just as importantly, they learn from their mistakes so that they are able to improve as they move forward in the business. It is human nature to dwell more on our mistakes than our successes, but business owners who succeed don’t let their failures stop them from taking another shot, which is how they keep pushing ahead to achieve lasting success.

Resilience – Failure Is Common, but Far from Fatal

Fortunately, failure in business is almost never fatal. In fact, failure can have some positive consequences. When viewed from a more objective lens, failure can spur motivation, provide enlightenment about what was not working, and open the door to new possibilities that had not previously been explored or adopted. Failure leads to change, which may be what is required for the business to succeed. 

NYU Stern School of Business Prof. Scott Galloway is a highly successful, serial entrepreneur and author, who has started eight to nine businesses, but at least one of which was a failure. In his book, The Algebra of Happiness: Notes on the Pursuit of Success, Love, and Meaning, he notes that “Success is a function of your resilience over failure.” He has counseled business owners on his podcast that:

You will know failure. The key is to learn from it, be upset, that’s natural. But +then get up, dust your pants off and move on.

It’s your ability to process things and then move on and not anchor off of disappointment that is key to success. In other words, you need to keep on keeping on. Failure and barriers are part of it.

The owner’s ability to demonstrate resilience is important not only for the owner, but for the entire management team, who look to the owner to set the tone for the company. If the owner shows resilience when confronted by failure, that will also motivate others. Leaders who show resilience in response to failure inspire their teams, create greater levels of commitment, and build powerful momentum toward a common goal. 

Adaptability – Be Strong Like the Oak, but Bend Like the Willow

Our paths in life are rarely straight, which is one of the reasons that life is so rewarding. Changing course can make a huge, positive difference, whether that is by changing schools, academic majors, careers, locations or business goals. We are all familiar with businesses that became more successful when they changed their focus. These include:

  • Apple was a computer maker, but achieved unprecedented global success when it pivoted its focus to the creation and sale of the iPhone.
  • Uber started out as a black car private service only to become the behemoth it is today when it changed its business model to providing drivers for everyone.
  • Amazon began as an online bookseller before morphing into a globally dominant online retailer of innumerable products.

Where a business starts is often not where it needs to go to realize its full potential, and the willingness to pivot to pursue a more profitable opportunity is what sets successful business owners apart. They are flexible, they are adaptable, and they are not afraid to make the changes that may be necessary to transition to a different business model, product or service that allows them to achieve a much greater level of success.  

Persistence – If It Was Easy, Everyone Would Do It

This may be the most obvious trait. It is no surprise to learn that hard work and grit are essential to success. Two more quotes from Thomas Edison sum this up well: 

Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.

Success is 10% inspiration and 90% perspiration.

The rewards of achieving success in business are likely worth the devotion required, but they cannot be obtained without a tremendous amount of effort and dedication.    

Forgiveness – The Antidote to Harmful Self-Criticism

The final addition to the four CRAP attributes is the ability to forgive oneself. In my experience, business owners are some of the most self-critical people on the planet. They have a tendency to accept all of the blame when things don’t go well but find it hard to take credit when their companies achieve success. The “imposter syndrome” is both real and debilitating.

Those owners who can both achieve and enjoy their success engage in self-forgiveness. They do not shrug off their mistakes, but they do not continue to berate themselves over any of the errors they made. As Prof. Galloway has said, they move on.  

Harboring on one’s own mistakes is not just counterproductive, it is self-destructive. The research bears this out. The Scope blog, published by the Stanford Medical School, reports:

Research has shown that those who practice self-forgiveness have better mental and emotional well-being, more positive attitudes and healthier relationships. A related outcome ties self-compassion with higher levels of success, productivity and concentration.

According to Carole Pertofsky, MEd director emerita of student wellness services, “Self-forgiving people recognize that a lack of self-forgiveness leads to suffering. They are kind to themselves, which reduces their anxiety and related depression.” In comparison, those who are highly critical of themselves are more likely to experience significant negativity, stress and pessimism.


Business owners face daunting challenges. They will undoubtedly confront failure, and success is often elusive. If they have the traits discussed here that amount to CRAP, however, and if they are able to forgive themselves for all of the errors they make along the way, they may find the success that awaits them was worth all of their struggle to achieve it.

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Family members who enter into a private business together are taking on double risk. They face the same types of challenges that all owners and investors face in operating/investing in a business, but they are also exposed to the risk their personal relationships may suffer if the company does not fare well. For this reason, the decision to adopt a buy-sell agreement (BSA) – a type of corporate prenup – may be even more important for owners of family businesses. The BSA provides a clearly defined path governing how a partner exit will take place when the co-owners are in conflict about their roles in the business or the direction of the company. Family business owners are hardly immune to disagreements that can arise among business partners, and this post discusses some of the significant benefits that owners/investors in family businesses can secure by entering into a carefully drafted BSA. 

What Are the Advantages of a Buy-Sell Agreement?

According to Forbes, as of in 2021 there are nearly 32 million small businesses in the United States. Yet, the Small Business Association estimates that only a fraction of these closely held companies have a BSA entered into by the owners. These sobering statistics may be even more applicable to family businesses, because in our experience, most family business owners do not take the steps required to evaluate and adopt a BSA before forming their companies or taking in family members as investors in the business. 

We view the BSA as a critical step in careful business planning. Family members, like other business partners, may enter into a business venture together with the best of intentions, but people and their financial needs can change over time. We are all subject to the four Big Ds: divorce, disability, dysfunction and death. And any of these may lead to a fifth D – departure from the business. A business divorce between partners may become a necessity if any one of these four Big Ds takes place, which can impact family members just as they do other partners. When a separation becomes necessary, having a defined partner exit plan in place – a form of BSA – will limit the conflicts that arise as the partners go through the business divorce process.  

For majority owners, the BSA provides owners with a contract right and mechanism to remove minority investors from the business who have become too difficult or demanding. For minority investors, the BSA provides them with the right to secure a buyout that enables them to monetize their ownership interest in the business if they become dissatisfied with the actions of the majority owner or of the management team. Thus, the BSA limits conflicts when a business divorce becomes necessary, because it provides for the orderly removal of partners and governs the specific terms on which the exit of a business partner takes place.

When business partners have not adopted a BSA, the likelihood of conflicts between them leading to litigation increases dramatically. And litigation among business partners is often bitter and prolonged, which may severely damage, if not end, close relationships among family members. Internal disputes and litigation between business partners will also likely cause major disruption to the company. Thus, having a well-drafted BSA in place almost always outweighs any possible disadvantages that may result. The following discussion reviews some of the most important benefits that can be achieved when partners make the decision to enter into a BSA:

  • BSA provides a clear path forward – The BSA provides for the departure of partners in a manner that limits conflicts between them. When no BSA exists, minority investors may become disgruntled because they have no path to an exit, and they may engage in disruptive actions that create problems for the business in efforts to force a buyout of their interest. Similarly, the majority partner may become frustrated no means exists to secure the removal of a minority partner, who is causing problems for the business and the other partners.
  • BSA sets forth a transition plan – In addition to providing co-owners with a clear exit path, the BSA also assures continuity of the business for its customers, creditors, and employees. A BSA defines the manner, method and timing of partner exits, including how the partner’s interest in the business will be valued at the time of exit. Thus, a BSA provides a clear set of rules that govern when a partner retires, dies, becomes disabled, is subject to a divorce, or is terminated. The BSA also applies when a voluntary sale of the business takes place, and in all of these instances, the BSA limits disagreements between the partners.
  • BSA establishes price point and exit process – A well drafted BSA sets forth the payment terms for the minority interest after the value is determined, along with the method for funding the payment. Valuation is often a hotly contested issue, but the BSA will specify in detail how the interest of the departing partner will be valued to avoid these conflicts as much as possible.
  • BSA creates an effective dispute resolution mechanism – To the extent that disputes arise between co-owners, the BSA sets forth a clear method for resolution, which is generally through a fast-track arbitration process. Thus, a comprehensive BSA helps partners to address disputes in a way that either avoids or reduces the time, stress and substantial cost that would otherwise result from becoming involved in litigation.   

Key Elements of a Buy/Sell Agreement

There are four chief elements of a BSA, which are discussed below. These are not cookie-cutter documents. Terms need to be considered by the co-owners with input provided by counsel who are experienced with these agreements, so they are able to reach an agreement that meets their specific needs. Each of the parties is advised to have separate counsel to provide them with guidance that helps meet their business objectives.

Determine how the BSA may be triggered

The first key provision of a BSA is the trigger point, i.e., the point at which the BSA can be exercised by either party to the agreement. Generally, majority owners will have the right to buy the minority owner’s interest when he or she (i) files bankruptcy, (ii) gets divorced, (iii) dies or (iv) leaves the company. These are private companies, and the majority owner does not want to be forced to accept strangers injected into the business, as these situations could lead to that possibility. But majority owners also want to have the right to pull the trigger and buy out the minority investor at their option so they can remove any disgruntled/difficult minority partner.

On the other side of the coin, the minority investor does not want to be required to exit the business before the company appreciates in value. The investor may therefore insist that the BSA prevents the majority owner from triggering a buyout of the minority interest less than three to five years after the investment is made. In addition, and importantly, the minority investor will also want to insist that a look-back provision be part of the BSA, which ensures that the minority investor will not receive a below market value if the majority owner buys the investor’s interest and then promptly sells the company (or a share of the company) for a higher value than used to pay the investor for its interest. If the majority owner redeems/purchases the investor’s interest and then sells the business (or a substantial stake in it) in a fairly short period of time for a higher value, the look-back provision will require the majority owner to make a “true up” payment to the investor based on the increase in value. The length of the look-back provision is negotiable, but it is often in place for a full year after the majority owner buys the investor’s interest.

Finally, while the minority investor may want to be able to demand a buyout whenever the investor desires to exit the business, the majority owner is unlikely to agree to permit the investor to pull the plug shortly after investing in the company. The majority owner may therefore insist that the minority investor cannot exercise a redemption right for at least three to four years (or longer) after the investment is made. This gives the majority owner a set period of time before the investor can withdraw its investment. The majority owner may also require that all of the investor’s stake in the company be redeemed at one time to preclude multiple exercises of buyout rights. 

Determine How to Value the Redeemed Interest

There are guidelines for valuing a private company, yet highly regarded valuation experts frequently reach different opinions about the value of the business and the value of the investor’s interest in the company. Given the importance of the purchase price to be paid to the departing partner, the co-owners should focus on how they want to determine the value of the company and purchase price when a business divorce takes place. It is often helpful to retain a business valuation expert to help draft the valuation provision and how the process will take place.

The major elements that the parties will need to consider in determining the value of the redeemed interest include:

  • What is the valuation date (should it be the date the buyout is triggered, or a specific day of the year, e.g., December 31, regardless of the trigger date)?
  • Should the value be based on a single date/point in time, or should it reflect a composite/average of the company’s value over the past two to three years?
  • After the value of the business has been determined, should minority discounts be applied in calculating the value of the interest held by the minority investor, which are discounts based on the lack of marketability and the lack of control that are often applied when valuing minority held interests in a private company?
  • Should the value of the company be based on a specific formula applied to the company’s financial performance (e.g., a multiple of the company’s revenues or earnings), or should the value be determined by business valuation experts who will rely on several different valuation methods? If so, how is the expert selected, and how are disagreements with the expert’s opinion resolved?

Further, agreeing to retain a business valuation expert to determine the value of the redeemed interest will not suffice to address all questions about the valuation process. The expert needs to be instructed by the parties whether or not to apply minority discounts to the company’s value, what the date of valuation is, whether a single valuation date is being used or whether the value determination should be based on an average of the company’s performance over a set period of years, and finally, whether the company’s value should include or omit retained earnings and/or working capital. All these issues need to be spelled out in the BSA.

The BSA will also provide the payment terms after the value of the redeemed interest has been determined. In most cases, the purchase price will be paid over a period of years after an initial payment is made. Therefore, the partners will need to document in the BSA (1) the rate of interest to be paid on the balance of the purchase price; (2) whether the majority owner will provide any collateral in the event of a default in payment; and (3) what rights/remedies the minority investor will have in the event of a default in payment by the majority owner.

Select a Prompt, Efficient Conflict Resolution Process

The final element of the BSA is the dispute resolution mechanism. It is not uncommon for partners to have conflicts over the value of the redemption price even when the BSA details how the value will be determined. Rather than allowing these conflicts to become the subject of protracted, expensive litigation that is carried out publicly in the courts, the parties can agree to make their disputes subject to a mandatory arbitration provision.

Arbitration is a matter of contract, and the parties can structure the arbitration to meet their needs by limiting scope, duration and timing of the arbitration proceeding. For example, in the BSA’s arbitration provision the parties can choose just one arbitrator or a panel of three; they can limit the scope of discovery permitted before the final hearing; they can require the final hearing to take place in just 60-90 days after the arbitrator (or panel) is appointed; and they can eliminate any potential award for lost profits or punitive damages by the arbitrator(s). This type of a fast-track arbitration allows the parties to agree to conduct a prompt, cost-effective and private resolution of their disputes without a public airing of grievances, which may hold significant appeal to family members who are in business together. 


Family dysfunction is the subject of countless books and movies, and those conflicts exist in family businesses, as well. One way to avoid or at least narrow the scope of the conflicts when family members enter into business together, however, is for them to adopt a BSA at the outset.  The BSA provides for a defined partner exit, which the parties can carefully negotiate to protect their interests as majority owners or minority investors if a business divorce becomes necessary. While no agreement can eliminate all conflicts, spending time on the BSA to pre-plan how a future business divorce will take place will help limit the issues that may be disputed in the future. Further, including a fast-track arbitration provision in the BSA will enable the parties to reach a prompt and cost-effective resolution of any future conflicts that do arise.

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“Uneasy is the head that wears a crown,” from Shakespeare’s Henry IV, Part 2, is often mistranslated in modern times as “Heavy is the head that wears the crown.”

Majority owners of private companies have many important decisions to make, but one of their most impactful will be selecting the people to serve as the company’s managers (for LLCs) or as directors on its board (for corporations). We refer to all of these governing persons here as managers. Although most majority owners retain the final say over all significant management decisions, the company’s managers often play a vital role in determining whether the business is successful on both a short- and long-term basis. This post reviews key attributes that majority owners will want to consider in the process of selecting their company managers.

Experience Counts

It may be tempting for the majority owner to select trusted friends to serve as managers, and their loyalty to the owner may make them hard to resist. But, if they have not had previous experience serving as managers at other companies, their ability to make contributions to the business may be limited. That is even more likely the case if they have not had any managerial experience in the specific industry in which the company does business. Loyalty is valuable, but it cannot substitute for the experience and knowledge of a manager who has worked with other successful private companies in the same space.

The candidate’s experience should be carefully reviewed and considered as part of a thorough screening process, because it will make them valuable to the business. Experienced managers will open doors to their business contacts, which may include bankers who can provide financing on favorable terms, insurance companies that can provide coverage at lower rates, and other vendors who can support the company. These experienced managers will also be familiar with mistakes that have been made by other businesses in the past, which will enable them to offer guidance that allows the company to steer clear of expensive pitfalls. By suggesting these more efficient paths, managers can make an important difference in the company’s profitability. Finally, experienced managers will be attuned to what competitors are doing, and their access to this type of information will help the company remain competitive in the marketplace.

Independence Brings Value to the Business

The attribute of independence runs a close second to experience in the selection process for company managers. Majority owners should resist the temptation to retain friends who will be “yes men” or “yes women” and applaud all of the owner’s decisions. This type of approval may feel reassuring to the owner, but it is not what is best for the business. Independent managers can provide an objective approach that allows them to challenge the status quo.  Companies (and owners) become more successful when their managers ask hard questions, when they push for the company to engage in innovation, and when they cause the company to think outside the box because it will fall behind if it becomes stagnant in its approach to the business.

Another important reason to appoint independent managers is that their independence will provide the majority owner with support in defense of future claims that may be made by the company’s minority investors against the owner. Specifically, if a minority investor accuses the majority owner of engaging in self-dealing transactions in breach of his or her fiduciary duties that are allegedly harmful to the company, this claim may require the owner to demonstrate that the transactions challenged by the minority investor were fair to the business. This majority owner’s response to this claim will be substantially bolstered if the owner can show that each of the challenged transactions was considered and approved by the vote of one or more independent managers, who also owe a fiduciary duty to the company. 

It should also be emphasized that the majority owner does not have to make an either/or decision when appointing managers, i.e., the owner is not required to appoint only managers who are either loyalists or fully independent. Instead, the owner can choose to appoint both types, because the owner controls the size of the management team. Therefore, the owner can appoint managers whose loyalty is prized, but also appoint managers who are independent, objective and more experienced, and this combination of managers best positions the company for success. 

Commitment Is Critical

Serving as a private company manager is not typically a full-time job, but it does require a significant level of commitment by the manager. There is no point in bringing a manager on board who is capable, but who is so busy that he or she just goes through the motions in providing input. Being an effective manager requires the investment of time to provide both oversight and guidance regarding the operations of the business. Managers need to spend a reasonable amount of time focusing on what is working well at the company, evaluating the specific challenges that the company is facing, and considering the options available to enhance the company’s growth.

During the interview process, the majority owner needs to clearly express the desired level of commitment from the manager, and the candidates will need to affirm they are fully on board. Independent managers will have a track record that can be reviewed along with personal references that can be checked. Securing the required commitment from managers is generally not a problem, but it needs to be a formal part of the recruitment/interview process.


Majority owners often believe the company’s success is dependent on their decisions. And while the majority owner is generally the most important decision-maker in the company, that does not mean the owner cannot receive support from others. This includes other officers who are working at the company, but importantly, it also includes the other managers. When these other managers are carefully vetted and then chosen to serve in a governance role based on their experience, track record and industry knowledge, they are able to provide valuable input to the entire management team. That is why majority owners are advised to look outside the group of their loyal colleagues to include truly independent, experienced managers as part of the company’s governance structure.