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Using a Revocable Trust for the Sake of Asset Continuity

One of the most powerful truths I have learned in working with family owned businesses, is that the world of entrepreneurialism moves at a very rapid pace. I have not worked as an employee of a company for 20 years, but my recollection is that being an employee was a more forgiving place, at times with little sense of urgency. Those workers with an “employee mind-set” were more concerned with making sure they got their ½ hour lunch breaks, 15 minute breaks every 4 hours, and punching the clock right on time. The world of entrepreneurs doesn’t work that way. It’s 24 hours a day, 7 days a week, 365 days a year. There’s a reason entrepreneurs are referred to as “movers and shakers.”  They eat, sleep, and breathe their business.

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Why Use a Revocable Trust

In my travels around the country working with family owned companies, I am always amazed at the significant and very public role these entrepreneurs play in their communities. Because of this we often recommend the use of revocable living trusts as a part of their succession planning environment. I’m also frequently amazed at the pushback on this powerful planning tool that we get from local attorneys. In one recent situation, our client’s attorney told our client that we did not understand this particular state’s laws and that probate in this state is not a big deal.

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Revocable Trust - It's Now or Later

Having heard, on multiple occasions, from local attorneys that probate is not a big deal, and knowing from experience that, indeed, probate is a big, fat, hairy, expensive, time intensive, insensitive, and emotionally challenging deal, I have asked these attorneys to share with me, from their perspective, just one compelling reason to not use a revocable trust.  Here are the two most common responses I have received:

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Family Business Advisor Teamwork

Family businesses rely on teamwork. The family infrastructure sets the inherent expectations and role model (good or bad) for teamwork to management and employees. The family team concept should also apply to their advisors. Most families base their advisor decisions upon relationship, often times with tenure taking blind precedence over the quality of service.  Although I acknowledge that the average family business is increasing in sophistication, I continue to see abuse and malpractice caused by predators who are seeking to take advantage of the natural tendency of family business leaders to rely upon relationships to make important decisions. Unfortunately there are far too many wolves wearing sheep’s clothing.

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Putting Your Business on Steriods

Some pretty famous people are back in the news for their alleged use of performance enhancing steroids.  That topic came up during a lunch with a client and a couple of her key advisors.  She turned to me and asked “Are there any steroids to enhance business performance?”

We all laughed, and then I said “Yes.  Of course there are.  We have been talking about them all morning; we just haven’t been calling them steroids.  We have been calling them by their generic counterparts:  policies, processes, and procedures.”  

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Watch Out for That New Best Practice. It May Not Be Right for You!

Much of the literature and buzz around best practices seems to presume that there is a universal business model or family governance structure that fits everything.  Personally, I haven’t found that to be true; so I generally do not recommend that a client, business, or family run out and adopt the latest and greatest approach to anything.  In fact, the greater the hype, the more likely I am to want to move away from it.  There’s something about a herd mentality that makes me want to wave the caution flag.

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Tips for Effective Communication

One of the reasons for going into succession planning is to communicate and present future expectations. Each of us has a very different physical and emotional map of the world. We experience the physical world through our senses – what we see, hear, touch, taste, and smell. These physical discoveries outline the territory. The emotional world of values and beliefs provides the filter system that help create a map for getting through life on a daily basis

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How To Define Your Vision - First Comes Confusion, Then Comes Clarity

Last week, we began talking with a client who is just beginning the succession planning process.  His comments were telling:  “We have been talking about this for years; and until now, we’ve managed to avoid dealing with some of these questions.  We did not like pushing ourselves so far out of our comfort zones.  It was uncomfortable; it was disorienting; it was confusing.  Last week, it all began to come together; and now, we wonder why we waited so long.”

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Successor Development: 5 Key Indicators for Evaluating a Successor

Once there are available successor candidates, business owners should take a less instinctive approach to selecting a successor from the candidates by evaluating some key traits. We refer to these traits as the 5 Cs: Character, Confidence, Capability, Competence, and Community.

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Bigger versus Better: Business Growth and Succession Planning

Succession planning is all about the long-term continuation of success through the next generation of owners and managers. Discussions of long range success generally bring up the subject of growth. This is a natural discussion because inherent with the concept of being successful is the assumption that successful businesses are vibrant and “growing” businesses. Furthermore, there are many who believe that succession and growth are synonymous. This belief is based upon the assumption that if you are preparing for the continuation of success there must be growth because competition is increasing and margins are decreasing.

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How to Use Your Imagination to Improve Business Performance

“I've really got to use my imagination - To think of good reasons - To keep on keepin' on”        .....Gladys Knight and the Pips

Have you ever heard this song?  It’s an early version of an almost worn out contemporary expression – think outside the box.  Generally, when we have performance/behavior issues within the business (or the family), we tend to follow a relatively safe process:

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Move Beyond Your Limits - The Imaginary Power of "What If"

Last Saturday, four of us took in “Letters to Juliet”.  It turned out to be much better than I had expected; and a few of the lines reminded me how powerful two simple words can become when they are placed right next to each other.  As the title suggests, those words are “what” and “if”.

For the moment, clear your mind (and your heart) of everything except those two words.  Use them to begin a string of sentences.  The sentences can range from the ridiculous to the sublime.  Here’s what I mean:

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Why Do You Have to Market Business Succession to the Family?

How much cash does your business invest in marketing?  No, not marketing to your customer base.  I mean how much do you spend on marketing to your employees and to your family. If your answer is anywhere from “Where did you buy that tobacco?”  to “Nothing.”, then you need not be surprised if your employees and your family members are somewhat less than engaged in your succession dream.

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Can You Be Too Optimistic for Your Own Good?

What do you think?  Can you be so optimistic that you are completely out of touch with reality?  Can you believe so strongly in your own dreams and ambitions for yourself, your family, and your business that you just do not “get it”?

Just a few days ago, I discovered that one of Frank Sinatra’s trademark songs from a few decades ago is now a ringtone for cell phones.  Written by Sammy Cahn and Jimmy Van Heusen, “High Hopes” is all about the need to believe you can overcome great odds against success. 

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How to Inspire Your Family With Your Succession Planning Goals

A classmate named “Howie” had a signature response to almost every exhortation that was meant to move him from one course of actions to another.  No matter how gifted the speaker or the written communication, Howie could be counted on to raise a simple question:  “And I should care because . . . ?”

We often believe that the power of what we say and/or do has the immediate impact of creating a compelling interest to do, buy, or follow.  When it does not, we generally think that others “just don’t get it.”  That is probably true.  But why do they “not get it”?

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Keys to Effective Leadership for a Family In Business

Family in business can be a significant advantage or a reciprocally significant disadvantage. The absence of respect and/or trust between the members, regardless of a common gene pool, confirms just a struggling Blood Related Business Group not a family. The struggles are known to all group dynamics as in rivalry, resentment, pay-back and other bizarre behaviors and attitudes that attempt to provide protection from perceived flesh eaters. Love is no antidote to the ills of this environment and predictably amplifies the frustration and anxiety associated with the disrespect and distrust from loved ones. In the absence of love, the rational members of the BRBG generally stop taking the abuse and move on to a more tolerable and reasonable environment. Whereas respect and trust provide inherent productivity advantages, distrust and disrespect provide an equally if not greater disadvantage.

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I've Sold My Business, Aren't I Done With Succession Planning?

Recently I was invited to speak to a group of successful business owners about the various aspects of succession planning (what I refer to as the Succession Matrix). The Succession Matrix consists of ten interdependent factors that business owners must successfully address to improve the odds that their business will successfully make the transition to and through the next generation of owners and managers. Addressing these factors is important regardless of whether you plan to sell your business or plan to keep it in the family. Often times these critical factors are ignored and unfortunately result in the business becoming another casualty.

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Effective Leadership - You Set the Tone

A few days ago I came across the following piece titled IT'S UP TO ME by Haim Ginott

“I've come to the frightening conclusion that I am the decisive element in the classroom. It's my daily mood that makes the weather. As a teacher, I possess a tremendous power to make a child's life miserable or joyous. I can be a tool of torture or an instrument of inspiration. I can humiliate or humor, hurt or heal. In all situations, it is my response that decides whether a crisis will be escalated or de-escalated and a child humanized or de-humanized.”

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Is Your Success Left Up to Chance?

In the movie Lawrence of Arabia, Captain T. E. Lawrence has to shoot someone he had once saved.  One of his Arabian allies slaps him on the back and says “It was written.”  Lawrence promptly responds with “Nothing is written. “  Both men had a strong conviction.  One believed in destiny, the other in choice.

Belief systems powerfully shape your culture, impacting your business strategies:  how products and services are manufactured, designed, marketed, and delivered.  How successfully you implement these strategies will determine business performance.  And, how successfully your business performs may decide whether your enterprise is a golden goose or a dead duck.

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Successor Development - How Good is Good Enough?

I was recently in a meeting with a son of a business owner, who was the identified 3rd generation successor leader to his family’s business. We were talking about some communication challenges he was having with his dad. His dad is a larger than life kind of guy, one whose shoes are hard to fill.  So, I asked, “What seems to be causing the difficulties?”

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