Are You Ready to Lead the Family Business?
In my last post, Is Your Company Ready for the Next Generation, I explained the importance of the first of seven phases that make up my 7 Steps to SuccessionSM process. In that blog, the cornerstone of the Founder (G-1) was thoroughly developed.
This blog will focus on the Successor’s (G-2) first phase, or block, in the McCabe Arch. I will discuss some family, financial, and emotional issues that a successor often encounters. In this cornerstone, the next generation needs to demonstrate that they are committed to this career path and willing to start the succession planning process.
Remember, it is not an obligation to assume ownership. It’s just the beginning of the process and the successor must personally assume the responsibility to actively create a solid succession plan along with the Founder. In all of my assignments, both G-1 and G-2 understand this clearly.
UNDERSTANDING G-2’S ROLE
The successor must commit the appropriate amount of time to learn not only the business operations and support functions, but understand the financial impact of the company – all of the things necessary to run a business. There are many opportunities and obstacles that lay ahead for earning ownership rights; the successor needs to understand this before moving forward. In order to understand what is at stake, the successor should think about these 5 questions:
- Do they understand the future growth potential and marketing position to keep the company competitive?
- Will the company require an upgrade of its product line?
- Do they understand the importance of the business to other family members and the community?
- Can they personally make a contribution to the ongoing success of the business?
- If there are co-successors, can they peacefully co-exist and create a unified leadership and management team?
Sometimes successors will have answers to these questions immediately. Other times, they may think they know the answers, but then realize that there is more to it than they thought. It is important to go through this exercise with them. It’s one thing to THINK you know the answer; it’s another thing to be able to clearly state what it is.
Emotions may surface when they ask themselves, “Do I have the fire in my belly to run the company month after month, year after year?”
INTERACTIONS BETWEEN FOUNDER, FAMILY & SUCCESSOR
In a perfect world, the Founder and Successor would have a close relationship with one another, but that is not always the case. The Founder and Successor may have some tension between them that stems from G 2’s poor choices as a teenager or young adult. The Founder still ‘sees’ that younger person, not the person that the Successor has become.
Many times siblings influence the succession plan. If brothers and sisters are active in the company, jockeying for the top jobs can cause friction. Everyone thinks they should be ‘the one.’ A tranquil scenario would be where only one sibling is active in the business while the other siblings have successful careers elsewhere. Those siblings have expressed no interest in taking an active role in the family business. Even then, the topic of financial ‘fairness’ might flair up when the succession plan begins or when the post-modum plans of the founder are disclosed after a premature death.
G 2 and G 1 cornerstones could be placed fairly close together to improve both formal and informal lines of communication. There may be less need to involve trusted outside advisors; rather those advisors would simply provide assistance on technical matters.
If the Founder/Successor relationship is not ideal, the cornerstones can be placed farther apart from one another. This symbolic placement allows trusted advisors into the succession process to help create a consensus and keep the plan moving forward.
If there isn’t a viable company that can be passed on or a willing successor, the succession process shouldn’t begin. But if both sides are present and willing, this cornerstone should be firmly placed. All future steps ascend from here.
Contact me if you have any questions about this phase of the succession process or to learn more about my succession planning and business continuity services.
Is your Company Ready for the Next Generation?
In a recent blog post, A Solid Foundation is Key for Succession Planning Success, I discussed what I look for from business owners BEFORE they start the succession planning process. Business owners need to clearly identify personal and family values, along with the business mission, vision and values, which comprise the foundation on which we will build a succession plan.
In this post, I will discuss a portion of the first of seven phases that make up the 7 Steps to SuccessionSM process – The Cornerstones. The Cornerstone for both the Founder (G-1) and the Successor (G-2) are firmly placed in this phase. These stones, or blocks, in the McCabe Arch are individually set at a different time within this phase. Both need to be aligned in order to create a solid succession plan. The remainder of this post is dedicated to the Founder’s Cornerstone.
Founder’s Cornerstone
With the foundation laid, the first phase of the process on the G-1 side revolves around making sure the business is profitable now and has the potential to grow in the future. In other words “Is the company sustainable?”
In order to understand this, some of the questions I ask the Founder include:
- Is there positive cash flow?
- Is there recurring revenue year to year?
- Is there a solid balance sheet?
- Is there a business plan that has attainable goals?
This piece can be tricky since determining if a business can be transferred is a science. The founders need assistance from various trusted advisors to assemble historical data and then project future results.
A few items that need to be considered when determining if a business has room for growth include:
- Size in terms of employees
- Overhead expense
- Customer base
- Location of company and customers
- Access to capital markets
- Key executive dependency
- Service and/or product lines
- Litigation/regulatory risk
- Volatility of the industry
Like I said, there is a science to ascertaining if a company is viable for transference. I went through this myself when passing on my own company years ago.
This assessment of sustainability allows trusted advisors into the succession process to help the Founder shape his cornerstone.
Who is a Trusted Advisor?
I have mentioned trusted advisors, but what type of advisors am I referring to? Here are a few that could or should be included in this first step of the succession planning process since they each bring a unique set of skills:
- Certified Public Accountant
- Banker
- Insurance Agent
- Corporate Attorney
One or more of these advisors may be asked to provide their expertise. If a business owner does not have a trusted advisor in one of these disciplines, I recommend an advisor that I know and trust to join us at the table.
During the analysis and appraisal of the company, we may find significant areas within the business that can be improved upon. A review of the organizational chart, operations and processes may identify gaps in the responsibility for Personnel/Human Resources, Sales & Marketing, IT or Finance. An advisor with skills in these areas should assist at this time and recommend solutions, if improvements can be made. These improvements may not be implemented before the positioning of the Founder’s cornerstone. However that may be addressed in future steps of the process.
My point here is that no company is perfect. But if the Founder has confidence that his company can be passed to the next generation, he should firmly place his stone. It represents his commitment to starting the succession planning process.
My next post will focus on the Successor’s cornerstone. I will discuss the challenges that Successors face as they commit to participating in the succession planning process. You will see that they are quite different from those of the Founder.
I provide balanced advice as I help business owners and their successors put a solid succession plan in place in case something unexpected happens to them or the business.
Contact me if you have any questions about this step of my 7 Steps to SuccessionSM process or to learn more about my business continuity services.
Do You Know What Your Business Endgame is?
Have you ever entered a competition expecting NOT to finish? No, probably not. What would be the point? In some competitions you are going for the win. Think about all the athletes at the Olympics. No matter how much of a long-shot an athlete might be, he or she is putting everything into that competition. No holds barred. They may not win, but they are certainly going to try.
In others, you may be simply want to finish. For anyone that has entered a running or biking race, you can relate. You set a goal, trained for weeks (or maybe months), and you are going to accomplish your goal. That may be trying to set a personal best time, or it may simply be getting over the finish line. But when you cross that threshhold, you are elated (and possibly exhausted as well). All of your hard work paid off; mission accomplished!
There is a third group of people; those that never enter the competition. Everyone has their own reason for it. They aren’t mentally capable. They aren’t physically capable. They just don’t have a desire or passion to pursue that amazing feeling of completion from a particular competition. That’s okay. There are millions of competitions that could mentally and/or physically challenge you. There are very few people interested in more than a few of them at any given time.
Now, replace ‘business owner’ for ‘athlete.’ A business owner needs to first determine what he or she is passionate about to know who they should compete against. Then they need to set goals, and train to become really good at what they do.
But what is their finish line? What is the end game? Is it to successfully pass on their company to the next generation, partners, key employees, or other suitors? It might be. But like with any competition, they need to know what the endgame is so they keep it in their sights. They won’t get there without a plan.
That is where I come in. I help them identify their goals, their goals for their business’s endgame, and help them create a plan so they can cross the finish line knowing they did the best they could.
I provide simplified processes for business owners who want to find a solution to the complex issue of Ownership Transference.
Contact me to learn more about my succession planning and business continuity services.
Has Your Business Planned for the Unexpected?
The Shareholder agreement, also known as the Buy/Sell agreement, can contain provisions to cover a multitude of events.
The most common events are when owners:
- Want to leave the business to take another full-time job
- Want to retire
- Get divorced or have family issues
- Become incapacitated or disabled
- Sell out for financial reasons (such as personal bankruptcy)
- Die
In this article, I will focus on the unfortunate event of an owner becoming disabled in some way. My first assumption is that the Buy/Sell document requires the purchase of any disabled owner’s interest in the business. The disability of any owner who is active in the day-to-day operations of any business could present serious financial problems. But for a small business, total disability of an active owner will have a greater effect.
The questions below are designed to stimulate your thinking on some complicated issues. I encourage you to write out some answers after you think about them as they relate to your business.
- What change would the disability have on the company’s income?
- What defines a disability from the business perspective?
- Where will the money come from to pay an income to the disabled (now non-contributing) owner?
- Should the money to buy the shares of the disabled owner be paid as a lump sum or over time?
- What if the disabled individual recovers after the buyout is triggered?
Did any thought go into the securing the funds needed to answer questions 3 and 4 when the Buy/Sell agreement went into effect? The owners could have establish a general use sinking fund or purchase disability buyout insurance. However these options aren’t often selected. If they are not, the remaining owner(s) will have an unfunded liability to buyout the disabled owner/partner.
Appropriate advanced planning will eliminate some of the confusion that stems from implementing the disability section of a shareholder agreement. Nothing is perfect in this world, but putting a sound business strategy, that includes a Buy/Sell agreement, in place makes the ride smoother.
I help business owners put a solid succession plan in place in case something happens to them or their business partners. I provide balanced advice so senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
A Solid Foundation is Key for Succession Planning Success
Foun.da.tion: noun: an underlying basis or principle for something. From the Latin fundatio(n-), from fundare ‘to lay a base for.’
Have you ever played the game, Jenga? That is the game where players set up a patchwork of hard wood blocks to make a tall, square structure. Then players remove pieces, one by one, and put them on the top until someone pulls a piece that makes the whole structure fall. Players have to be strategic in their choices so not to remove a piece that affects the foundation, causing the structure to collapse.
Whether you are creating a structure or a business, the first and most important part is the foundation. Without solid footing, a collapse is more likely than if the foundation is strong.
This is also true for succession planning. Here are some insights that may help you determine if the foundation of your business is solid or if it is on shaky ground as you think about succession planning.
When I advise company owners, the first thing I do is look at the foundation of the business. This could include:
- Core personal values of the business owner, such as fairness, honesty, trustworthiness
- Family values to pass to the next generation, such as good character and strong work ethics
- Business mission, vision and purpose, translating personal virtues into the business model
This foundation, or “fiber of the culture,” must be identified and clearly communicated before any other planning begins since this is the basis of the succession plan. Incorporated into these foundational components, however, are other values that need to be taken into account since they are part of the foundation’s structure. They include:
- Financial integrity
- Spiritual guidelines
- Emotional stability
- Business philosophy
- Profit motive
- Management style
When I begin assessing the components of a foundation, I use these values to determine the relationship dynamics of family members or co-owners, leadership structure, attitudes toward wealth and more. This is why each succession plan differs from any other one: no two businesses have the same dynamics, leadership style and values.
If I am working with a family business, it is important for me to see how the generations interact with each other. Is the interaction that of a mentor grooming a mentee or of a parent supervising a child? Is one generation conservative, but the other one wants to take risks? Does one generation value profit over all else, while the other one wants to promote good will with customers and employees? All of these dynamics – and many more – are cues I use to determine how strong the foundation is in order to put a succession plan in place.
Think about it – values can be very personal to someone. They are something that we begin to develop at a very young age from our family, then as children those values take shape as we learn from teachers and mentors. There are times when someone might not want to truly share what they believe, while others are happy to share too much. For those who don’t want to share, this information has to be carefully coaxed out of them by asking them a series of questions to try to get to the true answer.
Have you ever taken one of those behavior tests? As you go through the test answering questions, some of the questions seem to sound the same as other questions you answered earlier. Chances are you would be right. In order to know if someone is really being honest on the test (and with themselves), the test may have multiple questions surrounding the same topic, but asked in a different way, in order to see if the participant answers the questions the same way. If not, the participant may not fully understand their own underlying value or behavior.
That is similar to how I will drill down to get to the root values for key individuals in the business. These values will have to do with family, wealth, business, retirement, passions, leadership and more. At this time we can see if these values align with the business’s vision and mission. Most successful companies clearly state their purpose for all to see.
From here, we begin to see what is most important for the current owners, what they want to see from the next generation (or next set of owners), and how that aligns with the values of the next generation ownership.
Only now can the succession plan start to take shape.
I help business owners put a solid succession plan in place in case something happens to them or their business partners. I provide balanced advice so senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
Why Succession Planning is Like an Arch
In my succession planning business, I use an arch to describe the 7 Steps to SuccessionSM in my process through the McCabe Arch. I have been asked why I chose an arch to describe this process. There are a few reasons for this:
- An arch needs a solid foundation. If it is built on a soft or uneven surface, the structure will likely collapse under its own weight. The same can be said of a business and the succession planning process. If the foundation of a business is not solid, it is more likely that it will not succeed. However, with a solid foundation, a business can be a success and has a better chance to survive through multiple generations.
- The weight of an arch is carried by each section. This is what makes it so strong; the weight is balanced on side and through each section. A successful succession plan is also balanced on each side – Founder generation and Successor generation – and each step continues to build on the prior step to create a solid, stable plan.
- Each side need to be equally as strong as the other side. If they don’t come together at the top, the keystone can’t be securely placed and the arch (or plan) would easily topple over. Placing the keystone in a fixed position at the top of the arch provides the the necessity strength to firmly join the forces from each generation.
The first arch model was created in the late 1990’s when I worked at PartnersFinancial. At that time I was asked to design a program to help sustain a multi-generational member firm. This model was further developed as I realized that both generations needed equal time to understand what their role was going to be throughout this process and as an end result of the process.
While creating the McCabe Arch, I kept in mind the fact that every business, and every family, has unique dynamics, structure, members and goals. The Arch is flexible enough to take into account all of those distinct subtleties, and yet, provide the structure needed to build a succession plan that can unite all parties.
This process is also flexible from a time perspective. I have seen businesses where the Founder generation is not looking to retire any time soon. They like what they are doing and want to continue doing it. In that case, the succession plan is put in place, but not triggered until a future date.
Conversely, there are businesses where the Founder generation is considering retirement, but the Successor generation is not ready to take over. They may be young, or need additional mentoring, or are fulfilling other goals in life. The Founder needs to determine if he/she can wait for the Successor to catch up or if the succession plan needs to go down a different path.
What I have learned is that each situation is different. As the succession blocks are assembled throughout the process, as with any arch, they begin to lean in towards each other. However, the process would fail without proper support and commitment. It’s the Keystone, the block that adheres the two sides together, that is crucial to creating the solid plan.
My goal is to help any private or family business create a solid succession plan. I will continue to go into detail about the various steps of the 7 Steps to SuccessionSM process so you can gain a thorough understanding of it.
Contact me to learn more about my succession planning and business continuity services.
I Have a Dream: Martin Luther King, Jr. Day
Next Monday marks thirty years since Martin Luther King Jr. Day became an official federal holiday, honoring Martin Luther King Jr. I invite you to join me to reflect on this champion’s persistence and vision for human rights, justice and equality, rather than only focusing on his is 1968 assassination.
I remember when my next door neighbor and I rode our bikes to see what all the talk was about concerning protests on a main street in Oak Lawn, Illinois. Although I was only about nine years old, I vividly recall what we found: An orderly group of black men and women walking behind the lead row, setting a slow pace arm in arm. There was no violence on either side and very few words from the all-white bystanders.
A few years later when I was a freshman in high school in Chicago, Dr. King lead the Chicago Freedom Movement. Although I never personally saw him lead demonstrations against segregation in education, my respect for his nonviolent tactics grew.
But it was during that year when Dr. King led a march to promote open housing in Marquette Park, located just two miles from my school. I had classmates and good friends that lived in this all-white Chicago neighborhood so civil rights wasn’t distant any more. At the Marquette Park event, however, nonviolent black demonstrators were met with intense racially-fueled hostility. Bottles and bricks were thrown at the protestors; Dr. King was struck by a rock.
That evening I watched the news where Dr. King admitted in an interview that he had seen many anti-civil rights demonstrations in southern states, but none were as hostile and violent as the one he experienced earlier that day. I recall that I was truly disappointed that the movement attempting to try to achieve fair or open housing in Chicago would be such a major challenge.
After three years, the Chicago Freedom Movement’s goal to achieve fair open-housing, as a step toward ending the racial divide here, weren’t achieved. This was, in part, because a pact between Martin Luther King and other civil rights leaders and Mayor Richard J. Daley, as well as respected civic, business and religious officials, failed.
The sixties were turbulent times for me to grow up, but my respect for Dr. King’s nonviolent tactics grew. My admiration continues today and will be the centerpiece of my reflections this week.
So how did Martin Luther King Jr. emerge to be the premier Civil Rights leader?
His preparation for leadership was based a his considerable formal and diverse education. While attending Morehouse College, he was exposed to the writings of Henry David Thoreau. King was inspired by Thoreau’s essay, Civil Disobedience, which became a cornerstone of the momentum that would one day change the landscape of our society. King graduated from Morehouse College in 1948 with a Bachelor of Arts degree in sociology.
After that, he continued his education by attending his first integrated school, Crozer Theological Seminary, in Pennsylvania. As a student, he absorbed the teachings of many inspirational leaders from the past. But it is here where he first became exposed to the reflective teachings of Mahatma Gandhi. He graduated with a Bachelor of Divinity degree in 1951.
Needing a setting for his study of ethics and philosophy in a multicultural community, Martin Luther King, Jr. enrolled at Boston University in the Fall of 1951. He became “Dr. King” by earning a Ph.D. in systematic theology in 1955 at the age of 26.
He utilized the leadership abilities he had gained from his religious background and academic training when he was selected to head a group to protest the arrest of Rosa Parks for refusing to give up her bus seat to a white man in Montgomery, Alabama.
In his role as the primary spokesman of the year-long Montgomery bus boycott, Dr. King’s distinctive protest strategy was based on Mohandas Gandhi’s precepts of nonviolence and involved the mobilization of black churches and skillful appeals for white support. The bus boycott ended in 1956 when the U.S. Supreme Court ruled bus segregation was illegal.
Dr. King’s notable civil rights activities included his leadership of a group of 125,000 people in a Freedom Walk in Detroit in June 1963. On August 28th of the same year he joined more than 250,000 people in the ‘March on Washington’ where he delivered his brilliant ‘I Have a Dream’ speech at the Lincoln Memorial.
I’d be delinquent if I failed to emphasize that Dr. King had two major legislative goals for equal rights that he relentlessly pursued and succeeded to achieve:
- Passage of the Civil Rights Act of 1964. This piece of civil rights and US labor law legislation outlawed discrimination based on race, color, religion, sex, or national origin.
- Passage of the Voting Rights Act. This law was signed by President Lyndon Johnson in 1965 with the purpose of overcoming legal barriers at the state and local levels that prevented African Americans from exercising their right to vote.
This week I also recall some of the feelings of another personal experience. The year 2000 found me with a family business owner participating in one of my Exit/Succession planning workshops in Atlanta, GA. During a scheduled afternoon off, we went to the Martin Luther King Jr. National Historic Site. What a moving experience that was! To see Dr. King’s gravesite near the reflecting pool and eternal flame, as well as Freedom Hall and the other buildings on the site, were poignant and inspiring. We took our time visiting the museum, reading details of this phenomenal leader, completing the day by sitting near the reflecting pond talking about what we learned.
Frank, my companion that day, said that he learned Dr. King was Time magazine’s 1963 “Man of the Year”. I responded that I discovered that Martin Luther King Jr. received the Nobel Peace Prize when he was only 35 years old. Such a remarkable feat!
Click here to read the entire ‘I Have a Dream’ speech.
Here are three very short excerpts from Dr. King’s August 28, 1963 speech for us to ponder.
About the Past
“Five score years ago, a great American, in whose symbolic shadow we stand today, signed the Emancipation Proclamation. This momentous decree came as a great beacon light of hope to millions of Negro slaves who had been seared in the flames of withering injustice. It came as a joyous daybreak to end the long night of captivity.”
The Present
“Now is the time to make real the promises of democracy. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice. Now is the time to lift our nation from the quicksands of racial injustice to the solid rock of brotherhood. Now is the time to make justice a reality for all of God’s children.”
His Vision
“Let freedom ring from the snow-capped Rockies of Colorado. Let freedom ring from the curvaceous slopes of California. But not only that; let freedom ring from the Stone Mountain of Georgia. Let freedom ring from Lookout Mountain of Tennessee.
Let freedom ring from every hill and molehill of Mississippi. From every mountainside, let freedom ring.”
I help business owners put a solid succession plan in place in case something happens to them or their business partners. I provide balanced advice so senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
First-Hand Experience Makes the Difference When Advising Clients
If you are a business owner, you probably think about employees, customers, vendors, revenue, and profits on a daily basis. Any one area could keep you on your toes each day, right?
With so much to think about and do, who has time to think about an exit strategy? That’s the last thing that most owners think about. “I’m not going anywhere.” “I have a long time before I retire.” “I like what I’m doing; I’m not thinking about retiring anytime soon.” “After running my own company, I don’t know what I’d do.” These are common statements I hear from business owners.
But I also see the other end of it, such as when an owner gets divorced and that owner’s stake in the company has to be divided (or sold) as part of the divorce proceedings, creating a hostile environment. There is also the situation when an owner passes away suddenly and no one really knows what to do with the business or there are disagreements over who is capable of managing the business.
Not only have I worked with many private and family business owners, but I have also been involved with my own family’s business, Consolidated Pension Consultants. This is where I learned first-hand from my dad how to motivate a team, how to cold call, how to provide customers with the best service possible. It was amazing to see this man not only as my father, but as a mentor. Although I learned many things from my dad, I also learned a lot by seeing how businesses handled the transition from one owner to another. Some went smoothly; others failed miserably.
In the middle of this mentoring, it was my turn to join the Army (my draft number was ‘6’). While I was in the middle of my tour of duty, my dad passed away suddenly. His death was a shock to everyone. Because of great pre-planning, the family business had a written exit plan between my dad and uncle, who was a co-owner of the company. At the time of my dad’s death, my mother sold her inherited stock to my uncle, giving him full control of the business. The company’s employees and customers were comfortable knowing that the leadership of the business was in place and undisputed. With the proceeds from the sale of that stock, my mother was more than able to raise my younger siblings and support them through college. Though this adversity, it turned out to be a win-win between my uncle and mother, with no disputes.
When I finished my tour of duty a couple years later, I came back to the family business where I continued to be mentored by my uncle. I experienced first hand changes to our business, and saw changes happening to other family companies. As the generations continued to get older, the younger generation began to take more control of their respective businesses. Again I saw some of those businesses successfully transition to the next generation, while others did not.
After launching my own advisory business, I knew that there was a need for my clients to start forming the exit/succession strategy to strengthen their businesses. This planning needed a collaborative approach in order to be successful for both the current and future stakeholders. Not only did we counsel our clients on pension and profit sharing plans for their company’s employees and management team, but we also provided estate planning assistance to these owners. I took a very personal approach with my clients, who didn’t always know what their retirement future would look like.
Especially when a company has multiple owners or if you are an owner of a family business, you need to participate in the succession planning process early in the business life. This plan should be revisited every few years as the business expands, partners or other family members enter the business, or there are other major changes to the business. Vary rarely have I found the original plan to be permanent throughout the life of a business.
My exposure to a variety of circumstances throughout my career helped me to see that having a comprehensive succession planning strategy was critical for a business. I lived through it at my family’s firm, as well as my own company, where I groomed my youngest brother to manage and eventually own the company. My years of personal experience has taught me a few valuable lessons; it’s about letting owners fulfill their entrepreneurial dreams, plan for the future with their family members and co-owners, and face the challenges while thinking about the endgame.
Even a temporary plan for ownership and management succession is better than no plan at all. Having a succession plan in place builds the business owner’s confidence that their legacy will be sustained. I can help them make that happen.
I assist business owners with putting a solid succession plan in place in case something happens to them or their business partners. I provide balanced advice so senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
A True Story
Have you ever worked with someone who you agreed with 100 percent of the time? Chances are you probably haven’t. There will likely be some sort of disagreement along the way, even if it is minor. Co-owners of a business are no different. No matter how well they get along, they won’t agree 100 percent of the time. Sometimes a disagreement can be healthy and lead to new ideas. But if it is serious enough, it could lead down a path of mistrust and the possible demise of the company.
Today I want to share a real situation that occurred.
First, I want to share a little background. For part of my career I owned a company that administered Profit Sharing Plans to numerous private companies. The toughest part of this business was getting the multiple owners of a business to agree on the size of the tax deductible contribution to the plan.
Making decisions on what would be part of the ownership’s current compensation versus plan contribution triggered unhealthy disputes. Some owner’s opinions were so off-base that it escalated the disagreement into a full-blown conflict. Unfortunately, this was all too common. Their stance needed to loosen up a bit for the greater good.
Sooner or later, a compromise eventually straightened out the various owners’ viewpoints and solved the plan contribution…at least for that year. But if these owners couldn’t agree on a relatively easy decision like this, what were the odds they could keep their company alive?
Fast forward to the present. The stakeholders of this company have managed to avoid terminating the company by adjusting their thought process to be more in sync with one another and they are feeling comfortable.
Then a curveball is thrown their way. The current debate revolves around the question, “What are the ownership interest redemption rules when a partner dies?” That starts a new dialogue with more discussions that can be calm or very antagonistic.
My astute shareholder clients had thought about some alternatives and potential consequences before this curveball hit them. They compromised on the buy-back structure, but understood their wishes had to be written out. With the guidance of legal counsel, a shareholder agreement was prepared. Having this signed document in place kept the peace between those who inherited the stock from a decedent and the remaining living owners.
Lack of a plan most likely would have caused mistrust, anxiety and potential conflict, especially if an owner passes away suddenly. Anger and chaos only escalates the disagreement to a point where potential legal action may be required.
I help business owners put a solid succession plan in place in case something happens to them or their business partners. By providing balanced advice, senior management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
#GivingTuesday is TODAY
I am thankful that Black Friday and Cyber Monday are finally behind us! Frankly, I am already tired of all the belligerent commercialism that surrounds this holiday season. It is very important for all of us to turn our attention away from the deals and deeply discounted price sales strategies and focus on the real meaning of Christmas – giving back.
That is why #GivingTuesday is the perfect day to reflect on what is really important and use our energy to give back to those less fortunate. If your business hasn’t already done so, think about your holiday and end-of-year plans for giving and philanthropy. You have one month left in the year; now is the time to do it!
#GivingTuesday connects diverse groups of individuals, communities and organizations around the world for one common purpose: to celebrate and encourage giving. Believe it or not, in 2015 the #GivingTuesday organization raised $116,000,000 in online contributions in over 70 countries!
I would like to suggest that you consider supporting Americans that depend on local food pantries.
Click http://www.feedingamerica.org/about-us/about-feeding-america/why-feeding-america/ to find out more about their organization. But the whole point of the day is to have people be aware that there are so many great organizations – local, national and international – that need our support.
Most private businesses, at some point, will have profits to invest in equipment to help grow the company. The owners also must decide what excess profits to distribute. Perhaps an additional contribution to the 401 (k) plan, employee bonuses, and flow-through profits for S Corp owners? Since today kicks off the end-of-year charitable season, please designate some profits to give back.
For more information about #GivingTuesday, go to https://www.givingtuesday.org.
I help business owners put a solid succession plan in place in case something happens to them or their business partners. With that piece of mind, they can continue to reach for more and know their legacy will be intact. I provide balanced advice so management can understand the ramifications of different scenarios and can choose the right plan for their business.
Contact me to learn more about my succession planning and business continuity services.
