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Bridge Loans: Everything You Wanted To Know
As the name implies, bridge loans fulfill a vital need for active developers by giving life to a new project in the months before lenders feel confident enough to make available a construction loan, or a repositioning loan in the case of an existing...
Quality consulting major consumer products company
Organizational TQM Assessment The executive staff was trained on the key components of the Malcolm Baldridge criteria, and facilitated discussions that resulted in a baseline evaluation of the organization's TQM implementation. The Baldrige...
SELLING YOUR BUSINESS FOR THE BEST PRICE
If you are considering selling your business this article will help you evaluate your company as a strategic acquirer might. From that perspective it pays to focus on ten critical areas of value creation. The better your performance in these areas,...
Trade Show Exhibit Booth - 7 Tips to Improve Yours
Once you have decided to participate in a trade show, half your work is done. The other half starts with exploring ideas on how to get the maximum out of the event both in terms of brand building as well as sales enquiries. Here are seven easy to...
What is a Trainer? What is a Facilitator?
What is a Trainer? What is a Facilitator?
Recently, I've noticed that some corporations call their
trainers "facilitators." I can only assume this is meant to be
shorthand for "facilitator of learning." However, is
"facilitator" really an...
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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).
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