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Business Structuring and How it Can Impact Long-Term Goals

Business structuring deals with the mechanical aspect of how your business operates. The structure of your business has a direct impact upon items such as business taxation, control of business ownership, gift and estate tax on business transfers, and shareholder access to cash flow. As a business owner, it is critical that you or an experienced advisor understands the details relating to corporate structures and agreements between directors, owners, and key managers as they have a significant influence upon your business’ success and longevity.

 

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The Pope and the Catholic Church: A Succession Planning Case Study

 As I embark on my first article as a member of The Rawls Group, I figured I might as well throw myself into the deep end and entertain a topic that is undoubtedly surrounded by controversy: religion. The recent changes occurring in the leadership of the Catholic Church have not only fascinated me, but have also led me to ponder how such a significant change to this steadfast organization will affect the group as a whole. And I am not simply talking about those directly involved in the selection of the next leader of the Catholic Church; I’m also referring to the millions of citizens around the world that look to the Pope for guidance, purpose and support. 

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Change In Heart, Leads to Change in Plans - Is Your Succession Planning Strategy In Alignment?

Another situation I dealt with recently during an annual review of planning involved what I refer to as a “five minute bomb.”  Five minutes before the end of the meeting with a client, when I’m preparing to leave and go home, he says to me “oh, there’s something else I forgot to tell you” and it is inevitably an intense subject that requires much more than five minutes to handle.

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Please! What Is Succession Planning and Why Do I Need to Involve Outsiders?

The process of succession planning is significantly different for a privately-held and/or family owned business compared to a publicly held company.  For our purposes today, we’ll be dealing with the privately held because most businesses fall into that category.

Depending upon your advisor’s field of expertise, the definition of succession planning takes on a variety of meanings.  For some, succession planning is all about wills, buy/sell agreements, trusts, and estate planning.  For others, it’s about business performance and for another set of advisors, it’s all about family harmony.

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Create Family Harmony Using These Three Words

Family communication and harmony are components of the Succession Matrix® that can support or undermine succession planning strengths and weaknesses. As I work with families engaged in business, I come to the conclusion that harmony is a common goal of all except those consciously committed to terrorism and chaos. Although there is a limit as to how long we can hang out with some family members, putting aside current resentments most of our wants are stable emotions and to interact with family members as joyfully and productively as possible.

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How to Find Common Business Goals Amongst Diverse Family Members

 Families consist of diverse personalities which inherently reflect the greatest challenge to harmony and productivity. There appears to be no end to the challenges presented by divergent personalities within a family. Nothing appears to accentuate inner family personality differences more than an attempt at business collaboration. Those families dedicated to unity and harmony achieve admiration and those who are prepared to do whatever it takes to get attention or make their point, regardless of the emotional collateral damage, create stress and achieve bizarre goals.  Just like the evening news, little attention is paid to the good guys who are affirming unity while headlines are given to the ones who are making life miserable for the rest of the family. In reality it takes conformist to start and build a family business and it generally takes “self aware” eccentrics to achieve extra ordinary levels of success.

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Is Your Family Business Out of Balance? What You Should Know About the Family Business Equilibrium

Throughout my years as a business succession advisor I have witnessed a familiar set of actions and consequences across varying business types, which have resulted in constant turmoil and an imbalance in the “Family Business Acceptance Equilibrium.”   Since I have experienced so many businesses’ struggling with this common issue, it led me to give thought to why???  The culprit appears to be a confliction of attitudes that is blind, self centric and places a higher priority upon feelings, values or beliefs of one family member or key manager(s) versus the welfare of the organization as a whole. 

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Why it Takes 10 years to Confirm a Successful Family Business

Classically I believe it takes ten years to achieve confirmation as a “successful family business”. Up until approximately that point in time family leadership is being tested to determine if it has the moxy and versatility to maintain a workable balance and move closer to the optimum Family Business Acceptance Equilibrium unique to that family and business. Up until the ten year point from my perspective, most leaders do not know if compliant family and staff are simply tolerating insensitive “what have you done for me lately” conditional acceptance or appreciating the constant reaffirmation that “we are fam-a-ly” unconditional acceptance.

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Family Attitudes and Business Issues

More often than not, a weakness in what was prematurely perceived to be a successful family business is a reflection of predictable environmental wear and tear on both relationships and processes. Usually this wear and tear is due to the inability to achieve or maintain the Family Business Acceptance Equilibrium or Family-Business balance. 

Relationally, there may be great harmony or operationally  impressive nothing-slips-through-the-cracks accountability, however; regardless of past achievements, as a family business matures   success in both harmony and productivity that was initially easy to achieve   begin to be more challenging. Initially family members, eventually employees and ultimately on lookers recognize that there is something amiss. Business is no longer sufficiently gratifying for family members or productive for managers. Typically there is growing dismay as to why the business has become so difficult followed by the expenditure of significant time, energy and consulting dollars trying to tune up processes and procedures when the culprit lies within the culture of the business.

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Understanding the Cycle of Addiction

Do you have any bad habits? If your immediate response was no, then you might consider that you have a bad habit of lying. The truth is we all have bad habits and sometimes those habits can turn into addictions. In my work with family businesses I frequently interact with people who are addicted to something. Sometimes it’s a functional addiction and sometimes destructive.

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Why You Should Stay Engaged, Even After You Exited the Business

I was recently in a meeting with a father and his three sons working on developing some reasonable expectations between them. Dad was in the process of transferring stock in the family business to his boys. Being that partners are much different than father/son or boss/employee, they needed to clearly define their expectations.  I started out with what I thought was a relatively benign question of the eldest son – “What do you like most about working with your dad?”  His answer led us down a path of discussion that I could not have orchestrated if I were a magician.

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How and When to Turn Over or Sell the Reins

Today, let’s talk about how you set the stage for a graceful and timely exit.  Depending upon your disposition of the business – sale, family transfer, outside management - some of the steps listed below may take anywhere from a few years to a couple of decades to implement effectively.  So, the sooner you begin this process, the sooner you will be able to begin climbing other mountains. 

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Think You're Too Young To Begin Succession Planning - What You Should Know That May Change Your Mind

Translation: “I am bullet proof and have no intention of dying prematurely”, “I am not interested in enhancing business productivity, profitability and teamwork”, “The business is all about me” and “I am not interested in protecting the value of my business and the welfare of my family”. Do you realize that when you state you are too young to begin succession planning this is what you are actually saying? Think about it!

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Have You Fallen for One of the Biggest Succession Planning Misconceptions?

How many of you actually believe that you indeed “have it all done” when it comes to your business succession plan? Come on, be truthful. I know there are some of you who believe in your mind’s eye that you have done all you can to successfully transition your business. Many of your predecessors felt the same way you do, but the statistics speak for themselves: approximately 33% of family owned businesses succeed from the first generation to the second and approximately 10% successfully make it from the second generation to the third. The truth is, when it comes to business succession planning, there is no such thing as “having it all done” just like there is no such thing as achieving perfection. There is always something else to do!

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Do I Need a Succession Plan If I'm Going to Sell the Business?

Some would say “No.” And they might be right. However, I would encourage them to talk with Jay (not his real name) before they make a final decision.

We had been talking with Jay for several months about why a succession plan would be important to him. “My children have no interest in the business,” he told us. And, since he had no brothers, sisters, or other generational family members involved or interested in the business, he could see no practical value in moving ahead with our recommendations regarding succession planning. 

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