Mark Mitchell on building a family office
If Mark Mitchell could have a do-over in selling his company and launching his family office, he’d take it. Mitchell spent more than 20 years building a home health and hospice company that started in Madison Heights, Michigan, and grew to 42 cities in 12 states. When it eventually sold for around $330 million, he’d expanded the entity to 3,000 employees and $250 million in annual revenue. However, Mitchell says that since he sold it seven years ago, “I’m far more successful now than I was in 30 years.”
Some of Mitchell’s early experiences have served as cautionary tales, and he’s eager to offer some warnings to those just getting started in building a family office: Avoid the delayed gratification of selling your company later than you need to, and earn money by investing capital instead.
Another early lesson: Find new bankers. When running a company, “you have banking relationships for your business, but no really good investment banking relationships.” The advisers he had around him who had helped him manage his business operations, and helped him grow to a successful exit, turned out to be the wrong kind of advisers for managing his personal capital, steering him into expensive loans and bad deals. That all changed, he said, when he started working with JPMorgan’s high-net-worth group, which brought him better deals, better connections and even helped him hedge the cost of fuel for private planes.
How do you define success as a family and as a family office?
I personally define success on the relationship I have with my children.
Keeping my family involved, but truly, the success of the family office is defined by if something tragically happened to me, the family office would keep moving on with my children and its vision, and not miss a bump.
Keeping all that together can be monumental, the larger the family office is, and more complicated. You want your family office to stay on the same track with investing, so that if something happened to the patriarchal person, they could keep it going with the family in mind. Whatever the wishes or goals of the patriarch, instilling that within the family office. As opposed to getting institutionalized, with professionals just sending checks.
In my family, I have five children ages 28, 25, 13, 5 and 2. My investment decisions on the 2- and 5-year-old are different. We don’t split the individual investments differently among them, but their overall allocation is applied proportionally by age, to the age profile of the child. To do that, we basically ran a model on all the kids and aligned it with our family-office goal, that doubles every five years, to end up in a place where all the kids need to be worth the same at 40 years old.
At the same time, my family is at an inflection point. Both of my adult children are getting into their own businesses; they want to control what they’re doing. Their trusts are lending them the money for half the business.
Ultimately, this would be my success: When I got remarried seven years ago, I basically inherited a 5-year-old stepson that we share 50-50. After we were married for a couple of years, my adult children came to me and said they want their stepbrother to have an equal share in the family assets; they view him like their real brother. That was how I knew I did a really good job with my children, and that’s what I define as success.
What’s the latest purposeful investment you made, and why did you do it?
Avitus. It’s a bone marrow harvester that truly has better outcomes with patients. It did not hit my investment profile whatsoever; it was a smaller investment. It required some heavy lifting by us. My family investment committee voted it down. It would be the only time that I’d overrode them and asked them to let me have it and offered that I’d do the heavy lifting.
The company was pre-revenue, but FDA-approved; a small company with just five people. Relative to the amount of time we’d have to put in and other difficulties of managing an early-stage investment, it checks all the boxes for why we wouldn’t do it. But it was an investment I just felt we had to do; I believed I could set up the business better than anybody else. The prior investors had been in it for 11 years, VC firms who had done nothing to help set them up for success. They really needed someone to help them along, not just a check.
It’s a year later, we placed a key person in the company, and now it’s working on its own. Now, the investment committee came back and said they’re happy we made this investment.
Who or what helped you most in creating or managing the family office?
The family office got taken to another level when I hired a family-office manager to manage the family office. He worked for a family office for 15 years, and they started investing in something he didn’t believe in, and that’s why he left them. His name is Jim Oegema. Before I hired him, my family office just really had a couple of accounting people, a couple of investment people and myself, and that was really it. And a lot of things just got overlooked by me because I wasn’t interested. We hired him, and we put a little more depth into the family office. It now has 19 people in it.
What do you wish you’d known or understood earlier in terms of your own family office or family dynamics?
I haven't really had any family dynamics in my family office. Mine’s getting a little complicated because I have adult children, and I have very young children. The older children, I would like them even more involved, but they’re trying to make careers for themselves right now. The leadership team and the investment team help both of my children in the businesses that they’ve started.
If you could turn the clock back five or 10 years, what would you do differently in terms of your business and your family office?
Upon having my liquidation event, after I stopped working, I would’ve immediately hired a family-office manager. I think it would’ve added more discipline as to how I invested in the first three years. Probably the other thing: Early on, I surrounded myself with young investment-banker-type individuals. I was very impressed with how smart they were, but they didn’t have a lot of world experience. Everything could look great on paper with their proposals, but that was where the depth stopped. They couldn’t connect with management in businesses we were making investments in, or they weren’t the right jockeys for running those businesses. Many times, it’s about the jockey, not about the horse.
Steven I. Weiss is a multiple-award-winning investigative journalist. He has written for The Wall Street Journal, The Atlantic, The Washington Post and many other publications. He is also a data scientist and entrepreneur; his latest company is Candidates.ai.