Family Owned Businesses Presented by David Weaver Partner Presentation Goals Enhance understanding and awareness of succession planning Explain the multiple interdependent facets of Succession Planning ID: 602587
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Succession Planning for Family Owned Businesses
Presented by:
David Weaver, PartnerSlide2
Presentation Goals
Enhance understanding and awareness of succession planning
Explain the multiple interdependent facets of Succession Planning
Introduce the business structuring concepts associated with succession planningAnswer your questionsSlide3
Business Succession Planning
Preparation for continued success
through
the next generation of owners, leaders and managers in light of predictable,
probable
and
possible
contingencies.Slide4
Business Succession Planning
A challenging but highly virtuous goal for business owners, family members, employees and the community.
The sale of a business is a viable succession alternative.
A honorable, gratifying and profitable professional discipline.Slide5
Contingencies of Succession Planning
Predictable
Probable
PossibleSlide6
Business Succession is a Wonderful Concept
Perpetuates values and legacy
Promotes family harmony
Provides career opportunities for family members
Supports community
Creates optimum productivity and value
Supports the best and most powerful informal political action committeeSlide7
Succession Planning TheoremsBusiness succession is dependent upon multiple interdependent factors, known as the Succession Matrix®.
Succession planning requires teamwork
Owners and managers
Owners and advisor
Succession Planning Builds Value
.Slide8
Theorem #1:Succession Planning Builds ValueSlide9
Succession Planning Builds ValueA transitional
process
focusing on successful long term continuity of an operating business through the next generation of owners, leaders, and managers. Dependent upon addressing multiple, interdependent factors impacting all aspects of performance.Provides opportunity to
confirm the definition and purpose
for the business
.
Provides greater predictability success will continue for desired parties: successor owners, managers, employees, vendors
,
advisors
,
and capable buyers.
Increasing predictability
of continued success builds value.Slide10
Theorem #2:The Succession Matrix®Slide11
The matrix is dynamic; movement and change is the norm
The interdependence of the factors magnifies the complexity of succession planning
Factor strengths enhance weaknesses
Factor weakness undermines strengthsSome factors have multiple components
The Succession Matrix
®Slide12
There are 4 reasonably familiar, hard factors of Succession Planning
Personal Financial Planning
Business Structuring
Business PerformanceStrategic PlanningSlide13
4 Familiar Matrix Factors
Personal Financial Planning
Business Structuring
Outside Investments
Estate Planning
Exit Strategy
Credit Continuity
C-Corp., S-Corp, Partnership, LLC,
Joint Venture
Stakeholder documentation
Covenants, Golden handcuffs
Asset structuring: real estate, equipment, intellectual propertySlide14
Business Performance
Operational success drives customer satisfaction, working capital, cash flow and the value of a business.
Business Capitalization
Business Profitability
Strategic Planning
Confirms the vision, mission and core values that affirm a sustainable business culture.
Mission Statement
Management and/or Growth Vision
Strategic Plan with Accountability Steps
4 Familiar Matrix FactorsSlide15
6 Unfamiliar Complex “Soft” factors
Owner Motivation and Perspective
Leadership & Management Continuity
Successor Preparation
Management Synergy & Teamwork
Family Governance
Family DynamicsSlide16
The majority of issues impacting the continuity of your clients success are soft and generally unfamiliar and intimidating to the average attorney, CPA and/or financial planning professional
.
Soft Side of SuccessionSlide17
How Soft Issues Impact Your Work?
You may be the only advisor allowed in the corner office to discuss succession planning.
You may be the only advisor who is willing to take the risk of telling the truth.
Advisors will become involved in soft issues whether they choose to or not.
How involved will you be?
Will you lead or follow?
Will you be prepared to do what needs to be done?Slide18
Soft Issues Creates Client Opportunity
Enhance understanding and strengthen foundation of hard issue planning
Increase client control, dependence and revenue
Increase new client opportunitiesIncrease professional gratificationSlide19
Exploring the Softer Side of Business Succession
Owner Motivation and Perspective
Leadership & Management Continuity
Successor PreparationManagement Synergy & Teamwork
Family Governance
Family DynamicsSlide20
Owner Motivation & Perspective
The attitude and motivation of the owner toward the business impacts creditors, vendors, employees and managers
.
Common Issues:
Business Owner believes that the business is his/her toy
Considers the business his or her checkbook
Considers management, employees and vendors his/her servants
Defines success only in terms of money
Depends exclusively upon the business for fellowship, entertainment and validation
Does not allow children to struggle or fail and supports entitlement
Resents his /her children for not having to struggle for success
1Slide21
Leadership and Management Continuity
Family members, partners, shareholders and distributors/franchisers rely upon competent, motivated, committed and trusted leaders to set direction and managers to carry out the business mission.
Common Issues:
There is no confirmed successor leader
There is no transition plan for the successor leader
The successor leader is not respected by management
Key managers are not trusted
Key managers are being lured away by competitors
Ex managers are sharing trade secrets, customer lists and stealing customers
2Slide22
Successor Preparation
Succession is dependent upon an available, capable, committed and prepared successor.
Common Issues:
There is no family successor or contingency plan
There is no process for confirming successor capability
There is no plan to provide the successor appropriate training
There is no management transition plan or opportunity to assess the ability of designated successor
Vendors, franchisers or creditors do not respect successors
3Slide23
Management Synergy and Teamwork
Business succession is a formidable goal requiring collaboration and synergy among all who are seeking succession.
Common Issues:
There is little trust among managers
Managers and employees believe in turf management, every man for himself
There is no interdependence
There is no leader
Management rivalry and competition dominate interaction
There is discord regarding operating priorities
There is discord among managers regarding the successor leader
4Slide24
Family Dynamics
Effective interaction among the family members of current and/or prospective business owners is vital to achieving the unity and harmony critical to business longevity.
Common Issues:
There is friction, stress and conflict between parent operator and successor offspring
There is rampant sibling rivalry
There are in-laws who can not assimilate into the family
Family members go out of their way to irritate, agitate or frustrate other members of the family
Divorce or separation creating stress on family harmony and business decisions
5Slide25
Family Governance
Effective interaction among the family members of current and/or prospective business owners is vital to achieving the unity and harmony critical to business longevity.
Common Issues:
Ownership does not respect management, employees or vendors
Owners believes employees serve them
The next generation believes they are entitled to positions, titles, compensation and benefits
Owners have no means for holding family members accountable for respect, attendance, performance, etc.
No forum for family involvement and questions for active and non-active family members
There are no guidelines for being considered for employment in the business
6Slide26
It’s Inevitable…You will be impacted by or involved in soft business succession planning issuesSlide27
Theorem #3:Advisor Teamwork and SupportSlide28
Succession Planning – Team InitiativeSuccession planning is a multi-discipline professional endeavor best addressed through a well-coordinated team of highly motivated, diverse professionals. Slide29
ResourcesSlide30
The Rawls GroupBlog –
www.rawlsgroup.com
Educational articles
Samples – TemplatesPublications
Seeking Succession – How to Continue the Family Business Legacy, by Loyd H. Rawls
Succession Bridge – Key Manager Succession Alternatives for the Family Owned Business, by Loyd H. Rawls
Estate Planning Heartburn Relief – Answers to Gut Grinding Estate Planning Questions, by Loyd H. RawlsSlide31
International Succession Planning Association®
Dedicated to the promotion, empowerment and expansion of the succession planning environment
Provide professionals access to education, tools and a network of expertise to leverage and enhance their ability to serve their clients succession planning needs.
Network of Professionals – Membership
Education – Certified Succession Planner
Planning Platform – Succession Planning Assessment
Slide32
ConclusionSlide33
Summary
Succession planning is a maturing profession
The interdependency of the Matrix can create an overwhelming challenge
You are not alone: support is availableStaying within your specialty will keep you as a compliance advisor – expanding into the softer issues will allow you to grow to be a
reliance
advisor