Professional Intervention in the Family Business

Written by Don A, Schwerzler and David Jones


Continued from page 1

The first phase ofrepparttar intervention process we normally recommend would include an OPERATIONAL ASSESSMENT ofrepparttar 105262 business.

What opportunities are available in terms of profit optimization, cost containment or cost reduction? What are operating parameters ofrepparttar 105263 business and what changes in operational procedures or operational protocol might increaserepparttar 105264 ROI ofrepparttar 105265 business? What options are available for improvingrepparttar 105266 health ofrepparttar 105267 business, both internally as well as inrepparttar 105268 marketplace? This OPERATIONAL ASSESSMENT providesrepparttar 105269 family businessrepparttar 105270 facts and objectivity that are often obscured byrepparttar 105271 owner /managers being too close torepparttar 105272 problems.

The second phase would includerepparttar 105273 involvement of a family business ocnsultant who is skilled in both business and family dynamics. These professionals are focused on opening up and developing allrepparttar 105274 possible channels of communication. These professionals should be able to facilitate a strategic plan forrepparttar 105275 business and a strategic plan forrepparttar 105276 family as well.

Addressing one system and ignoring others is wrought with problems that can cause a family business to self-destruct - especially when dealing with generational issues.

The third phase ofrepparttar 105277 multi discipline approach focuses primarily onrepparttar 105278 tax consequences of succession. Without proper planning, succession (planned or unplanned) can become a financial catastrophe for bothrepparttar 105279 business as well as forrepparttar 105280 family.

More often than not, some financial planning has taken place. Unfortunately, most of these efforts are focused only on one individual -repparttar 105281 owner/ entrepreneur. As a result,repparttar 105282 planning generally is incomplete or only sequential solutions are engaged.

The financial planning for succession should be approached fromrepparttar 105283 perspective of minimizingrepparttar 105284 total tax consequences of succession. This concept allows forrepparttar 105285 development of a connected and well integrated approach, an approach that considersrepparttar 105286 goals and objectives ofrepparttar 105287 family as well asrepparttar 105288 future needs ofrepparttar 105289 business.

The "on-going" processes for maintaining a healthy family business would include strategies such as conducting annual or semi-annual FAMILY MEETINGS and establishing an outside BOARD OF ADVISORS.

It should be noted that one ofrepparttar 105290 major benefits of this multi-disciplined team approach isrepparttar 105291 ability to involve "outside" professional intervention torepparttar 105292 family business in a purposeful yet expedient manner. Althoughrepparttar 105293 segments ofrepparttar 105294 process have been cited to help illuminaterepparttar 105295 process,repparttar 105296 multi-disciplined team approach allows for each segment to be addressed simultaneously.

If this approach makes sense, give us a call so we can discussrepparttar 105297 particulars of your situation and help you to formulate a plan of action and a timetable for beginningrepparttar 105298 succession planning process. The most difficult hurdle to overcome is procrastination hopingrepparttar 105299 problems will go away or will solve themselves. As Tom Watson, former head of IBM, reflected, lying dead inrepparttar 105300 water and doing nothing is comfortable because it is without risk, but it is an absolutely fatal way to manage a business".

Don Schwerzler and David Jones are Partners in the Family Business Institute - a special resource for family-owned and closely held businesses (http://www.familybusinessexperts.com).


Succession - Three Tips to Ease The Transition

Written by Don A. Schwerzler and David Jones


Continued from page 1

Depending onrepparttar purpose ofrepparttar 105260 valuation, costs can vary significantly. Less complicated valuations done for planning purposes can be very affordable.

Some family business owners valuerepparttar 105261 business every year as part of their strategic planning process. Others userepparttar 105262 valuation as a means for determining performance based compensation for key executives (phantom stock) rather than choosing to diluterepparttar 105263 ownership ofrepparttar 105264 stock to a non family key executive.

3. Funding is often a hidden or non recognized cost of succession planning.

It is important to understand thatrepparttar 105265 business may need to grow significantly in order to payrepparttar 105266 transition costs which include taxes, insurance, professional advisors, setting up trusts and purchasingrepparttar 105267 business stock. Or, funds that would be available for expansion or to pay out torepparttar 105268 family will have to be retained inrepparttar 105269 business forrepparttar 105270 transition. Either way, planning for this cash flow requirement will easerepparttar 105271 transition.

A good rule of thumb is thatrepparttar 105272 business needs to grow by at least 20 percent more thanrepparttar 105273 normal growth pattern to offsetrepparttar 105274 costs of succession without disruptingrepparttar 105275 profitability and cash flow ofrepparttar 105276 business.



Don A. Schwerzler and David Jones ar Partners at the Family Business Institute - a special resource for family-owned and closely held businesses (http://www.family-business-experts.com).


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