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Informative Articles

8 Reasons the Holidays are a Great Time to Build Your Business
Too many of the clients I talk to write off December as a marketing black hole. After all, people aren't really focused on doing anything but holiday shopping and attending parties, right? Why not preserve your energy for a time when...
Affluent Name Recipients of December Holiday Gifts in New Survey
Where Gifts Are Purchased Varies by Type of Recipient About 90% of the married respondents to a recent survey of the affluent plan to give a December holiday gift to their spouse, and the most frequent sources of the gifts will be...
Affluent Turn Cautious in Outlook for Personal Spending and the Economy
The Affluent Market Tracking Study #8, the just released Fall 2005 report in a continuing series of twice-yearly surveys by The American Affluence Research Center (AARC), reveals several important changes in the 12- month economic outlook and...
Setting Goals and Implementing Change
One of the most important aspects of management is implementing change and setting goals. Managers must decide what their goals are and how they are going to achieve them. This is a basic part of strategic planning. Setting small goals is a small...
Start Thinking Strategically About Your Business
�You�ve got to think about the big things while you�re doing the small things, so that all the small things go in the right direction.� - Alvin Toffler While we all know it is important to plan for the future, very few businesses...
 
Succession - Three Tips to Ease The Transition

Succession - Three Ways to Ease the Transition

The succession process can cause havoc in the family business and the family. Especially if the process occurs only once and without a significant investment in planning. Here are three ideas to help ensure success for your family business.
1. Hire the most competent advisors (attorneys, accountants, financial planners and family business experts you can find and afford.

Succession planning is a complicated process and requires different kinds of expertise. Not every professional service advisor has the special training and experience necessary.

For instance, few lawyers, accountants, family therapists and psychologists are specifically trained or experienced in this field. You may wish to consider using family business experts to act as a quarterback for the succession planning process. All too frequently different advisors to the family business owner develop costly and ineffective sequential solutions to the complexities of succession. If someone is selling elevators, escalators are usually never recommended as a means of transporting people within a building.

2. Business valuation is a critical element of succession planning.

There are many reasons to value a business. Unlike socks where one size fits all, one valuation does not fit all situations.

A valuation for sale to the next generation of family has different formulas than a valuation for sale to someone outside the family. Yet a different


formula would be used for estate tax planning purposes.

Depending on the purpose of the valuation, costs can vary significantly. Less complicated valuations done for planning purposes can be very affordable.

Some family business owners value the business every year as part of their strategic planning process. Others use the valuation as a means for determining performance based compensation for key executives (phantom stock) rather than choosing to dilute the ownership of the stock to a non family key executive.

3. Funding is often a hidden or non recognized cost of succession planning.

It is important to understand that the business may need to grow significantly in order to pay the transition costs which include taxes, insurance, professional advisors, setting up trusts and purchasing the business stock. Or, funds that would be available for expansion or to pay out to the family will have to be retained in the business for the transition. Either way, planning for this cash flow requirement will ease the transition.

A good rule of thumb is that the business needs to grow by at least 20 percent more than the normal growth pattern to offset the costs of succession without disrupting the profitability and cash flow of the business.





About the Author

Don A. Schwerzler and David Jones ar Partners at the Family Business Institute - a special resource for family-owned and closely held businesses (http://www.family-business-experts.com).

 

Strategic Planning (in nonprofit or for-profit organizations)
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Strategic planning - Wikipedia, the free encyclopedia
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08/26/96 STRATEGIC PLANNING
You guessed it: strategic planning. Suddenly, the idea of rising above the ... But if strategic planning is back with a vengeance, it's also back with a ...
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Dr. Strategy - Dr. Pete Johnson, Keynote Speaker, Marketing ...
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Strategic Planning Society: Strategy Development and Implementation
Strategic Planning Society: Strategy Development and Implementation.
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STRATEGIC PLANNING MANUAL
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BPubs.com: Strategic Planning & Business Planning Articles
Business Publications related to Corporate Strategic Planning.
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Strategic Planning Tools
Strategic Planning is a method for positioning an organization to take ... A strategic planning process incorporates an in-depth planning model that takes ...
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