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.

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Trademarks and tradedress ( the packaging and design – how the brand is presented – the materials chosen etc.)  protect your logos, name, packaging and other unique design expressions.  When you claim and/or file for trademark protection, remember, you are locking in the design and it must be used consistently going forward, or you will risk your ability to enforce your rights going forward.

Consistent “presentation” and use (including use by your suppliers) are keys to protecting intellectual property.  You can’t protect it if you don’t use it consistently.

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How can you be open to the unexpected?

1. 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] ;
2. 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];
3. 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].

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Just as important, though, and often largely overlooked as an equally critical element of the process is the focus on succession’s meaning for the successor.  The new owner/leader will have his/her own set of transition issues as s/he takes on the role previously held by a predecessor and moves to make the job/company, his or her own.

Long-term transitions are usually destructive, pitting the outgoing leader against the newcomer, as they take charge and let go.  Usually not more than a 3-6 month transition is in order, if that long.  While the agreement of sale, may contain  a long-term employment/consulting contract for the incumbent, it will probably be bought out rather than lived out.  In management succession, the incumbent has usually left the organization or moved into another position without much of a transition (though the exiting person may be on call for a time).

Therefore, organizations with strong work flow processes and documentation tend to fare better than those with largely oral cultures.  Another strengthening technique for management succession is to include members of the work group in the selection process.  Making them part of the process often helps choose a better successor and begins to form bonds with the new leader even before s/he takes charge.

Whether engaged in an ownership or managerial succession process good systems and document and engagement of the people involved in making the succession work contribute to stronger long-term results.  Is your organization well poised for succession?

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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.

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Reprinted with permission from Real Estate Business magazine. ©Copyright 2009 by the Council of Real Estate Brokerage Managers. All rights reserved. This item can’t be reproduced, reprinted, or retransmitted without express consent of Real Estate Business magazine and the Council of Real Estate Brokerage Managers.

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On the medical side, do you have:

• A durable Power of Attorney (PoA) relating to your temporary or long-term incapacity and/or your death.  This document allows your selected representative to continue to conduct your business, even when you can’t;

• A Health Care Directive signed and executed, identifying who you have chosen to be (and who has agreed to be) responsible for acting upon your instructions for medical care, even when you can’t.  Be sure the person chosen is committed to do what you want done;  Resource: (http://www.geocities.com/organdonate/LifeSupportDirective.html)

and/or,

• A Living Will that’s in place and that follows the same guidelines for a Life Directive.  Many states have their own forms and requirements. Also who or what agency is responsible for processing the paperwork, and how it is administered, may be different in many states. Instructions for MD’s noting prior care or illness, drugs, allergies, etc should be included, even if not required.

• The State of Pennsylvania has a web site with a form that combines these forms into one.  Remember, though, that many states have their own requirements, so make sure to check if your state has more stringent requirements.  Go to:  http://www.aging.state.pa.us/aging/lib/aging/Sample_Forms_for_Advance_Directives.pdf.

On the personal side, you should have:

• A Last Will and Testament (including the allocation of personal items);

• Recordings (audio and/or video) to key people you want to reach out to;

• Personal business financial records (bank, credit card, retail store cards with account #’s, institutions, passwords, where records kept) [IF YOU DIE, SAFE DEPOSIT BOXES AND/OR BANK ACCONTS SOLELY IN YOURNAME ARE TYPICALLY FROZEN. JOINT ACCOUNTS ARE TYPICALLY NOT HANDLED THIS WAY.]

• Electronic Records (accounts, passwords, disposition);

• Business financial records and Intellectual Property (IP) – List the status and contents of your IP assets – who will manage your creations going forward; small businesses (corps, llc’s etc) PoA for survivor(s) in charge, Employer Identification Numbers for each entity (EIN), business bank and credit information, passwords and payment due dates.

• Anything private you want to keep private from one, or more, relatives/friends, should be handled confidentially by your PoA, or be put in a safe place for the duration of your at risk period, or for disposition at your death.

• Contacts. Information your representative or the person designated as your PoA will also need names, addresses, phone numbers and e-mails for the following individuals (if you use them):

o       Attorney(s)

o       CPA

o       Financial Planners

o       Management Consultants

o       Physician(s)

o       People you want to reach – Those you want contacted personally and by whom – seal their information in envelopes with their names, addresses, phones, e-mails, etc indicated on the outside of the envelope.  You may also share that you have a message for them, in advance.

I’m sure it’s possible to write an entire book covering all the contingencies and identifying all the people you may want to touch one more time (just in case).  Many of us resist the notion of preparing for a crisis because we’re healthy today.  Preparation though, is nothing more than making sure you get what you want done, even if you can’t ask for it to be done.  I’d rather be prepared.

That’s about it, and here’s hoping none of it is necessary (just yet). By the way, my friend’s surgery…turned out just fine.

DISCLAIMER – None of the information contained herein is intended to be legal or medical advice. Consult an attorney for legal advice and your physician for medical advice.

John Reddish, the Succession Planner & Get Results Coach

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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

2. http://www.bizinvermont.com/biz_in_vermont-blog/2009/7/10/exit-strategy-planning-from-overwhelm-to-completion.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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