Small Business Succession Planning
Tip Of The Week
High Praise
One of the highest compliments you can give a member of your work team is to praise them in the presence of their spouse. Then both can be deservedly proud of the hours spent working.
Avoid Estate Surprises
Surprises at a party may be a great deal of fun. Surprises at the reading of a will when the estate involves a family business may be a catastrophe. You have the legal right to distribute your estate as you wish. But, in my opinion, if the assets of the estate affect the continuation of a business, you need to let "the rules of the game" be known. This is preferably done "early in the game" so all can prepare emotionally and financially for the future.
Positive Focus
Start each family business meeting with this exercise. Each individual at the table is to briefly tell something good that has happened since the last time you met — something good in the business, or something good in his or her personal life. Beginning with something good activates your brain to focus on positives and achievements. Both are needed regardless of what items you might have on your agenda.
The Right Way To Ask "Why"
When seeking information or clarification about an issue or problem, choose your opening words carefully. Beginning with the word "Why?" creates a defensive position of justification. You are asking someone to prove it to you. Rather, start with phrases such as, "Would you help me understand the reasons for..." or, "What would happen if..." or "Could we also..." These phrases invite a conversation and build a stronger team
Surprises at a party may be a great deal of fun
Surprises at the reading of a will when the estate involves a family business may be a catastrophe. You have the legal right to distribute your estate as you wish. But, in my opinion, if the assets of the estate affect the continuation of a business, you need to let "the rules of the game" be known. This is preferably done early "in the game" so they can prepare emotionally and financially for the future.
When seeking information or clarification about an issue or problem, choose your opening words carefully
Beginning with the word "Why?" creates a defensive position of justification. You are asking someone to prove it to you. Rather, start with phrases such as "Would you help me understand the reasons for..." Or, "What would happen..." or "Could we also...?" Those phrases invite a conversation and build a stronger team.
In this fast-paced world, the time to deliberate before we act may be shortened
But don't shortcut this three-question ethics check: Is what I am about to do legal? If my actions were to appear as the headlines in my local newspaper, would that be OK with me? If my family and friends knew about my actions, would they cheer me on? When the answers to these questions sit well in your gut and heart, you have a foundation to support your action.
When your values are clear, behaviors and decisions are much easier
Do you have a written code of conduct for your personal life and for your business team? If so, you'll spend less time sitting on the fence and more time in aligned productivity.
Do you really want the legacy of your family business to continue?
If so, then the earned transition of labor, management, leadership and ownership takes place over a pre-determined period of time. There's a huge difference between "saying" something and actually "doing" something.
Want to avoid a lot of frustration and problems with family members who work together?
Have each family unit own their own house. Oh yes, you might lose a tax deduction, but I've had hundreds of conversations with next generation in-laws, siblings and parents. Sniping and resentment are often the result when one has lost the power of independent decisions about one's home. There are worst things than paying taxes.
Value people more than you value things
The farm or ranch won't take care of you when you are sick or sad. Your family and friends will. What have you done to appreciate the important people in your world?
Which are you, a "family-first business" or a "business-first family"?
There's a major difference in philosophy, actions and results. The first makes decisions based on egos, emotions, feelings and hopes. The second utilizes education, experience, communication skills and management tools to make consistent, process-driven decisions. A "business-first family" reduces stress and increases productivity and profitability. Additional benefit? You increase your odds of becoming a happier family.
The word "retirement" leaves a bad taste in the mouths of many farmers and ranchers
But, if you move from retirement to "refirement," there is excitement with the next opportunity planned and in place! And, with that attitude, you will still be needed as "the wise consultant" for those continuing to farm and ranch.
How are you different than a hamster on a wheel
I've met farmers and ranchers who never stop to applaud their own accomplishments. They just continue from task to task, season after season, round and round the wheel continues. The result is stressed out, burned out, worn out...and one day they look back and wonder, what was it all for? Take time to pause and celebrate the many accomplishments of your work! It's renewing, invigorating and rewarding!
Family business members wait in line to tell me their stories
"You won't believe what they did to us." "You won't believe how we were treated." What follows are sad sagas of resigned defeat and years invested in dashed hopes. Here's what I've learned. You can't always control what has happened to you...but it is important to face reality and make peace with your past so it won't mess up your future. Hopefully you have learned important lessons of what not to do with your children.
I've found three common ways in which assets are distributed at death – by sale, by gifting, by pilfering
Have legal and personal documents in place (and sometimes photos of items) so that the transition of assets will happen according to your wishes. It's often the missing toy, antique or memory item that breaks up a family.
Review your will!
If you have guardians listed for your children and they are now 27 and 25, chances are your will needs to be reviewed and revised!
What is your total compensation package?
Family business members often lament, "We get paid so little!" What have they forgotten? Fringe benefits! With a closer look, we add up housing, utilities, vehicle, health insurance, life insurance, disability insurance, retirement plan, fuel, edible groceries, phone plans, computer and more! Shocking. So little is not so little.
Family members may not be the right fit
A family business is not a place to rehabilitate a family member! If there is someone in your family who is angry, addicted, arrogant or lazy, don't hire them. No one else would. Why should you?
Don't let the state make choices for you
At death, everyone will have their assets distributed – either the state will tell you how it's done, or you can decide. You'll like your choices better! Pick up the phone and schedule a meeting with your advisors to formulate your plan and your will. If your spouse won't go...then go by yourself!
Like it or not, you're in the people business
The more I work with people, the more I like hogs! If I don't like that critter, I can send it to market! Problem...those of us in agriculture are in the people business – family, employees, consumers, fellow producers, suppliers, politicians. Whether you agree or disagree with them, you'll need solid "people skills" because you can't send them to market!
Make sure your words are in a contract
Don't confuse a conversation with a contract. Words in a conversation sound good. Words in a contract make sure your word is good. A distraught son shared, "I always thought my father's word was good enough. I was wrong."
Adapt your thinking to changing conditions
Remember that phrase, "If you always do what you've always done, you'll always get what you've always gotten." I disagree. I believe "If you always do what you've always done, you'll be out of business!" The pace, the people, the process and the products for agriculture have all changed. Have we? We must keep learning and our school's not far away. Begin with the offerings at this site. Expand your knowledge and your connections.
Coming home to farm isn't always the answer
Just because you want to, doesn't mean you get to! I'm often told by college students that after graduation, they plan to go back home to the farm. I always ask, "Have you been invited?" Becoming a part of a family business is not a birthright!
Business records must be clearly documented
When asked specific questions about the farm's finances, the farmer replied, "I'll be glad to show you the books, but which set of books do you want to see? The one I have for the IRS, the one I show my advisor, or the one that's real?" Oops. Documented and transparent business records are the foundation for a good and successful business.
Clarify the roles of new family members
A new daughter-in-law asked, "How long do you have to be married before you get to be family?" How would you answer that question? Businesses must decide, "What, if any, is the role of a spouse in the business?" Family members must express their wishes, if any, for inclusion or involvement in a family business. It's best if this is clarified before a ring is on the finger.
What you need from the best next leader
What before who! Choosing the best next leader for your business requires first defining what characteristics and skills are needed to lead the business; then who is best qualified for that job. If we don't do it this way, we often end up with the "golden child" and the business in a mess. By the way, the best person to lead may or may not be a family member!
Leaders need a good replacement plan
The number one job of a leader is to replace himself or herself. Use a responsibilities chart to note who currently is in charge of each task. Then gradually transition management and leadership from one generation to another, task by task. Not only does this build confidence, it also allows growth while the "wise master" is nearby to mentor.
Your spouse offers security to you and your business
At family business workshops, I've asked hundreds of conference attendees, "What is the number one thing you want from your spouse?" The answer? "Security. If something happens to my spouse, what happens to me, especially if the business owns the house in which we live?" There are vital reasons for life insurance, financial planning and estate planning.
Consider this when hiring family members
Hire family members well because it's darn hard to fire them! Before you hire a family member ask: What talents and skills could you bring to the business? Does the business need those talents and skills? What will it cost the business? Will your value justify the cost? Have you worked for a non-family boss for two or more years? Worthy applicants matched with worthy work make a better business and a happier family.
Don't let emotion derail the family business
In agriculture, we stand on our soapbox — sound science must be the basis for best decisions! Yet when it comes to a family business, we often ignore the facts and make decisions by emotion, or don't make decisions at all. It helps to have a trusted team of advisors. They get out the "sound science book" and help us explore the facts. Together, we make sound decisions which increase productivity, profitability, and improve family relations.
Copyright © 2009 Jolene Brown. All Rights Reserved. Reproduction granted for Farm Bureau Financial Services by Jolene Brown.
