Family Businesses – Treasured Heirlooms!
January 13, 2010
In many families there is a giving ritual. Treasured heirlooms are given from one generation to the next. Parents carefully think about what would be treasured by each child, and they are gifted accordingly. What’s often unspoken is that the parents feel the gift will be both treasured and maintained.
Ownership of the family business is often gifted more like an asset than as a treasured heirloom, with less though given to issues of being treasured or maintained. It is seen as an entitlement or an annuity. But ownership in a business is not the same as ownership of a bank account, or uncle Harry’s portrait. A business has a life of its own and has its own identity. Nobody is paying interest on its worth – it needs to be worked, nurtured and allowed to respond to its customers’ wants and needs. If you are offered the gift of ownership in a family business, make sure you are willing to invest in the gift. If not, ask for your inheritable interest to be converted to its cash value and paid.
Biz Succession: Who’s Stepping Up?
January 6, 2010
Who and what come next are critical to your exit strategies and business succession plans. Sometimes you get to choose both who and what come next. Other times, opportunity knocks. If it does, you need to be open to these possibilities, or you lose.
How can you be open to the unexpected?
- It’s not over ‘til it’s over. Remember, you can be pursuing a course of action, but still make changes – even reverse course – until you reach your final decision point [I was once involved in a deal that was all but done when the owner changed his mind about selling at the closing. “I’m not ready to go,” he said. No Deal Is Done Until the Papers Are Signed, Sealed and Delivered] ;
- Never count anyone out. As you get closer to your decision point people who you may not have considered may unexpectedly step up to be counted. If you are too locked into your initial choices you could miss out on an opportunity you haven’t anticipated [in the sale of one family business, two sons were vying for control. After a series of activities working together planning for succession, the brothers changed their minds, switched positions, and that changed everything];
- Be alert . Nothing happens in a vacuum, the marketplace, the economy constantly change. Circumstances may reveal other possibilities you can take advantage of at the last minute [Last minute changes in a deal make it better for all parties concerned].
Business Leadership and Responsibility
October 28, 2009
The leader (who is often the primary owner or stakeholder) of the businesses, or organization, is responsible to see that the business is treated as an investment, both in terms of time and money commitments.
There may be paid managers and staff to perform some or even all of the day-to-day tasks, but ensuring an adequate return on investment (blood, sweat and money) is the leader’s responsibility.
There are two components of an adequate return: time invested must be compensated through salary, benefits and perks; AND, money invested must be guaranteed a fair rate of return plus a premium for the level of risk assumed. Adequate returns do not just happen, they are achieved through planning and action. This commitment involves setting realistic, quantifiable goals; taking the steps necessary to attain the goals; measuring the results; and, adapting along the way.
The leader is responsible to ensure that the business invested in has a real business or community (if a non-profit) purpose. This means: being realistic about not throwing good money after bad; separating real, business activity from ego gratification; and assuring at least a baseline of security by taking prudent risks.
The leader is responsible to the people who work in the business. This involves: establishing organizational goals; providing direction about employees’ responsibilities in meeting these goals; setting standards of performance; and providing job performance feedback. Organizing work in this way frees employees to perform effectively because it assures them that their positions are not held capriciously at the whim of the leader and that their paychecks are not constantly in jeopardy. Taking this approach also facilitates identifying organizational successes and potential roadblocks. In a world of rapid change, a little perceived security goes a long way.
Finally, the leader is responsible to him- or herself, his/her family and other stakeholders to do succession planning. Timely, thorough (and flexible) succession planning can facilitate a smooth transition when the leader determines that: the business is no longer viable; s/he has personally had enough of it; or, it has just become time to step aside.
Succession Planning Blogs
July 31, 2009
Lest you think I am the only person working on and/or writing about succession planning, there are other points of view and they are offer terrific perspectives. Some will largely agree with my experience, some add different perspectives and others are contrarian.
Your exit strategy/succession plan is vital to your future, so I’ll be posting the views of others from time to time and keeping them current as I find them. If you know of an article that should be here, send it in and if the author is agreeable, I’ll post a link to that piece as well. The intent is to help best inform you on the important decisions surrounding your moving on, or moving out.
Happy reading:
RESOURCES
1. From David Stember
http://www.bizinvermont.com/biz_in_vermont-blog/2009/7/28/succession-planning-a-process-not-an-event.html
3. From Tim Berry http://bplans.typepad.com/blog/2008/01/how-our-success.html
John Reddish, the Succession Planner & Get Results Coach
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You Really Can’t Replace YOU!
July 17, 2009
You’re the founder, the driving force, in some cases, you are even the brand. At the same time, and if you’ve done your job well – and most of us have – the company has a life and a future beyond YOU. Dislodging yourself as the cornerstone of the company, sooner rather than later, has many expected and unexpected benefits. Top among them are:
- If the company is sold, you are less encumbered by employment/consulting agreements, appearances for the company, long covenants not to compete, etc.;
- If the company is not sold, but annuitized, you get the same benefits as above, but without some of the restrictions, but you may also have some risk exposure still;
- If you suddenly find time on your hands, and have been complaining, “if only I had time to…” you will now be one fewer excuse away from actually doing…;
- Having time on your hands will reap unexpected opportunities to explore yourself and your world. Not having to be at your desk forces you to be somewhere else, see other things, and that alone changes something, if not everything;
- Your successors and all your employees will become more self reliant, so if you get sick or disabled, you and your estate will be less at risk;
- Your successors, in particular, will probably come to appreciate you much more as the “buck” will be stopping on their doorstep; and,
- You may find out that YOU, while a comfortable old suit, needs a rest, while you get to see your company take on new life and new possibilities.
John Reddish, and his Associates at Advent, help entrepreneurs and other leaders who want to master growth, transition and succession to get results faster, less painfully and in ways that work for them. This happens through consulting, coaching/mentoring, training and/or speaking. Understanding that there is no ONE path to get results, client services are tailored to the way s/he can best use our services.
Succession’s Great Fear – Irrelevance
May 11, 2009
Don't Let your Busines Fears Make you Feel Invisible
Studies I read and my own experience tell me the same thing – fewer than half of all companies have ownership succession plans. It happens in some very large companies and it happens in most small businesses. And, in fact, some business succession plans that exist are merely print exercises to allay the fears of share- and stake-holders, with the leader having no real intention to, or desire for, stepping down.
Is it fear of planning? Is it fear that by identifying successors in advance, they may try to force the leader out prematurely? Is developing an exit strategy merely a low priority?
Thirty years in the business tells me succession planning’s greatest inhibitor is the leader’s fear of becoming invisible – irrelevant! Not wanting to go – ever – is part of it. For many leaders, particularly founders, the entity (profit or nonprofit) is psychologically tied to their own self-worth. I feel this same fear in my small company – I want to do this forever, and know I can’t.
So many of us put succession off. We tell ourselves it won’t happen to us – YET! We tell ourselves, and our possible successors, they aren’t yet ready to assume control. We turn a blind eye to the importance of who, and what, comes next. WE know next, counts, but that’s for tomorrow.
Some of us have no plan for tomorrow and so the fear rises to the level of terror. What would we do if we didn’t come in to work?
I have a friend who I helped forge a second career as a professional director after his “corporate” days were done. His post-work plan called for serving on a few boards, playing tennis (and, as I recall, golf), traveling with his wife and family, kicking back a little and just savoring life. Two years into his plan, he was busier than ever with his board work, his games still wanting love and birdies, kicking back was not yet on the calendar, but, he was spending more quality time with his wife and family.
Like many Boomers, I struggle with the fear of becoming invisible, irrelevant. But I know that fear is like the childhood fear of monsters in the bedroom, I know better. I feel it, but I know better, and try to help others because if our ideas, our businesses, our legacies are to survive and prosper, it is a fear we must all overcome.
Is this fear standing in the way of a crafting a succession plan that works for you?
(C) 2009 John J Reddish
Testing Your Passion – A Leader’s Responsibilities
April 21, 2009
A leader (who is often the primary owner or stakeholder) of the businesses, or organization, is responsible to see that the business is treated as an investment, both in terms of time and money commitments. There may be paid managers and staff to perform some or even all of the day-to-day tasks, but ensuring an adequate return on investment (blood, sweat and money) is the leader’s responsibility.
There are two components of an adequate return: time invested must be compensated through salary, benefits and perks; AND, money invested must be guaranteed a fair rate of return plus a premium for the level of risk assumed. Adequate returns do not just happen, they are achieved through planning and action. This commitment involves setting realistic, quantifiable goals; taking the steps necessary to attain the goals; measuring the results; and, adapting along the way.
The leader is responsible to ensure that the business invested in has a real business or community (if a non-profit) purpose. This means: being realistic about not throwing good money after bad; separating real, business activity from ego gratification; and assuring at least a baseline of security by taking prudent risks.
The leader is responsible to the people who work in the business. This involves: establishing organizational goals; providing direction about employees’ responsibilities in meeting these goals; setting standards of performance; and providing job performance feedback. This organized approach frees employees to perform effectively because it assures them that their positions are not held capriciously at the whim of the leader and that their paychecks are not constantly in jeopardy. This approach also facilitates identifying organizational successes and potential roadblocks. In a world of rapid change, a little perceived security goes a long way.
Finally, the leader is responsible to him- or herself, family and other stakeholders to do succession planning. Timely, thorough succession planning can facilitate a smooth transition when the leader determines that: the business is no longer viable; s/he has personally had enough of it; or, it has just become time to step aside.
If you have truly lost your passion, it’s time to go. Following are steps to take to protect yourself and your estate as you go.
Check out this earlier post for part 2 of this post “Your Walk Away Checklist:” http://www.thesuccessionplanner.com/exit-strategies/crafting-your-business-succession-plan-and-strategies-my-top-18-tips-to-your-successful-business-sale/2008/11
Part 3 of this post to come later in the week
© 2005, 2009 By John J. Reddish, CMC
Take Note Michael Phelps
February 3, 2009
Take note Michael Phelps. A few years ago another good guy athlete, Kobe Bryant, got caught being not so nice, and it cost him millions of dollars in endorsement contracts.
I did several press interviews during that scandal. During the interviews, I pointed out that virtually all endorsement contracts contain a “morals” provision, stating that scandalous behavior on the part of the celebrity could result in immediate termination of his/her contract. I also noted that “Bad boy/girl” celebrities can act badly and hardly impact their endorsement contracts at all, but if you present yourself as one the “good guys/girls” you have to live up to your good reputation, or else.
From a business succession perspective – understanding the importance of who/what comes next – anyone seeking or holding endorsement or sponsorship contracts should think long and hard about behaving badly. It’s not just a matter of doing what’s right, we’d all argue in favor of that. It is also a matter of protecting the “goose” that lays golden eggs. Kobe Bryant was on the way to becoming a superstar in the endorsement arena. Michael Phelps has been on a similar track. Both derailed. How badly is still unfolding.
In Phelps defense, smoking marijuana is far less troubling than committing adultery. Furthermore, his 2004 underage drinking incident has not been repeated. Still, I believe he is literally on the brink. Some sponsors have not renewed (according to the Associated Press, Rosetta Stone, AT&T and PowerBar have ended their relationship with Phelps). Some are supportive (notably Hilton Hotels, Speedo and Pure Sport). Others (VISA, Kellogg, Subway and 505 Games), have yet to speak out (some sponsors choose to let contracts expire quietly rather than take a public stand).
To an advertiser, particularly a consumer products company, even the hint of scandal can tilt sales downward, particularly when parents as well as their children are controlling the spending. In a recessionary period it
might not take much to say, “Goodbye, Michael.” If Michael Phelps gets back on track, he’ll still make millions, but one night’s high has certainly lowered his prospects. Another incident and it could be even more costly.
There is always a “next.” Understanding the importance of, and knowing how to prosper from the transition is what succession planning is all about.
John Reddish speaks to and works with entrepreneurs and leaders who want to master growth, transition and succession to get results faster, less painfully and in ways that work for them. Contact John at: 610.506.6311 or e-mail to: Johnr [at] getresults [dot] com.
A Friend Has Passed
January 19, 2009
Fred Buggie, president of Strategic Innovations, Inc. and a long time Senior Associate of Advent, died last week, just shy of his 80th birthday. When I heard of his passing, thanks to a call from his widow, I was alternately sad and smiling.
Fred, a Yale grad who went on to do some of the best work (in my opinion) done in the late 20th century in the area of corporate innovation (as founder and president of the Strategic Innovation Inc.), was a constant source of new ideas and a wonderful story teller. He loved his work and it showed. He also has a wicked sense of humor, once telling a joke about cats at a client meeting that I forbade him from ever telling again.
I first met Fred when I was Vice President of Special Programs at the Presidents Association of AMA and he came to me to propose a workshop for CEO’s and Company Presidents on his Innovation Process. Later, when I left AMA, we became associated and were involved in a number of projects over the years. Even when not actively working together, we maintained an active correspondence, sharing jokes and new product development ideas.
I will miss Fred’s smiling face, quick wit and thoughtful collaboration. And I will remember him, as well, for the gifts he shared, for times spent together and from the learning he graciously shared. Goodbye, Fred, thanks for the memories.
Succession – How Does Social Security Factor In?
December 8, 2008
Social Security was designed as a safety net. But what kind of safety net is it? For those of us who are Boomers, it’s a politically secure safety net, but one that only provides some of what we will most likely need when be begin to slow down. Some underlying facts about Social Security can be found at Money Central on MSN.com, like what percentage of current earnings Social Security replaces. It’s revealing.
What this article doesn’t say is that Money Managers often grossly overestimate just how much we’ll need in retirement (depending, of course, on healthcare needs). People are retiring comfortably on much less than the 80-90% recommended amount. (I’ve suggested reading Fred Brock’s excellent “Retire on Less Than You Think” book from the New York Times. It tells you the numer can be much less than that, often as little as 50%, depending upon lifestyle.)
What it also doesn’t give you is the value of the Social Security payment you will receive in terms of how much savings you would have to have if Social Security weren’t there in the first place. Each $1,000/month in Social Security benefit would, if payable from savings/retirement funds, have to be supported by an investment amount of about $240,000 (at 5% interest). That’s truly something to think about.
John Reddish‘s expertise is helping entrepreneurs and top executives who want to master growth, transition and succession, get results faster, less painfully and in ways that work for them. John is a member of the National Speakers Assn. For more information: www.getresults.com. For succession information, go to: www.thesuccessionplanner.com. Or call 800.726.7985 in the US, 01.610.388.9335 internationally, or use the contact form to e-mail me.
