Communication is the key to a successful family business transition

Open Communication

Imagine the following scenario. Dad and Son are the sole shareholders in a successful family business. Son-in-law is a key employee in the business. Dad never discussed his will or his estate plan with either Son or Daughter. Dad dies somewhat unexpectedly. Son inherits remaining interest in the family business, becoming the sole shareholder. Daughter inherits cash equal to what Dad thought his interest in the company was worth. Daughter does not exactly agree with Dad’s opinion of the value of the company. Son-in-law, who does not have a non-compete agreement with the family business, leaves company for a competitor. He takes a substantial amount of business with him. What is worse, Son and Daughter no longer speak to each other. Unfortunately, this scenario is not an unfamiliar situation for many family businesses. While the facts may be different, too often family businesses are harmed when the head of the ...

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Now is the time to execute your small business succession plan

Succession Plan

What will happen to your small business if you die? If your answer is, “I don’t know,” then consider yourself in the majority. According to a survey conducted in 2015 by CNBC and the Financial Planning Association, less than 30 percent of small businesses have a written succession plan. This figure is staggering, especially in the context of today’s aging population. Consider this: over one-half of the nation’s 28 million small business owners are older than 50. Not that succession plans are just for the aged. Young, budding entrepreneurs also need to consider the possibility of their death or their disablement affecting their business. Young or old, if you do not have a succession plan, now is the time to decide who is going to run the company in your absence and how they are going to assume ownership. Keeping it in the family Many small businesses are started with ...

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How to build a remarkable business that thrives without you

Build a Successful Business

Last month’s article, “Family Business and the Second Generation Curse” discussed the issues of succession in family businesses. The article noted that only 30% of family businesses survive the second generation. It listed five suggestions for improving the successful transition of a family business from one generation to another. The first suggestion was to build a business that can run without you. Whether your long-term goal is to pass your business to the next generation or to sell your business, you are not going to be very successful if you are still integral to the daily operations of your business. Any potential buyer will be able to quickly determine your daily involvement in the business operations before an offer is made. And family members involved in a family business already know. Once the secret is out, you may find that you have fewer parties interested in buying your business. The ...

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Family business and the second generation curse

The Second Generation Curse

One of my retired partners, Bill Zachman, used to tell me, “The first generation is the innovators, the second generation is the administrators, and the third generation is the trust beneficiaries.” Isn’t that true? One person takes a risk, invents a product, goes out on a limb, whatever. Through that person’s efforts, a business is founded. Eventually, the reigns are left to the son or daughter. Things are good, business is good, money is flowing, son or daughter is running the business. Then one day, son or daughter realize that they have neglected one thing, their own children. Not only are their children not prepared to run the business, but they are not prepared to manage their personal finances. Having been the product of successful parents, they do not value the hard work that their parents and grandparents needed to build the business. They are spendthrifts. So, son or daughter ...

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About David

About David

David is an accountant and adviser for small business owners. He also coaches clients on leadership and success. David is an avid reader. He blogs regularly on the books that he is currently reading.

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