In this issue
A generational transition is a critical point in the life cycle of a family business. All too often the senior-generation leaders believe they have a foolproof succession plan in place, but problems arise when the time comes to pass the torch.
Here are just a few of the ways a succession plan can go wrong, along with some troubleshooting advice.
1. The viewpoints of all parties are not considered.
From the moment the 2001 tax bill was enacted there was considerable uncertainty about what would happen come 2011, when the ten-year life-span of the 2001 law was scheduled to have run its course. Although it took Congress and the President until the third week of December 2010 to hammer out the rules, the changes to the federal estate tax and gift tax law made by the new 2010 tax bill represent a substantial liberalization of the law. This will give a big assist to many succession plans.
If Mabel Williams hadn’t singed the hair off her eyebrows and lashes in a 1915 kitchen fire, there would be no Maybelline eye makeup today. Using a technique she had read about in Photoplay, Mabel mixed ash from a burnt cork with coal dust and Vaseline, then applied it to the missing brows and lashes. One of her brothers, Tom Lyle Williams, was fascinated by Mabel’s concoction and the way it enhanced her eyes. Tom Lyle, a movie buff, realized at that moment that glamour in those early days of Hollywood radiated from actresses’ eyes.
Do you know the true value of your business? Valuation specialists can provide you with a range of multiples based upon a pretty good set of industry data. But what is your business really worth? It may not be as much as you think!
Why is this? The answer may involve your “hit by a bus” plan. Has it been battle tested?
Celebrating, and capitalizing on, family firms’ inherent duality
Family Business as Paradox
By Amy Schuman, Stacy Stutz and John L. Ward
Palgrave Macmillan, 2010
210 pp., $40
When your family makes decisions, do you put family first or business first? A new book contends that there is a better way to approach common family business dilemmas: choose both family and business.
Generation of family ownership: Third.
2010 sales: $100 million.
Number of employees: 100.
Years with the company: 18.
First job at the company: The summer I was 18, I worked in the factory loading trucks in the warehouse, and on the packing line packing the wagon bodies and wheels for shipping. After college I did a year of volunteer work, teaching school on the west side of Chicago. I joined the company afterward, in sales.
As the global economy began to emerge from the recession, family business leaders were optimistic about their prospects for the future, according to a global family business survey conducted by PricewaterhouseCoopers. Though many reported being well positioned to compete economically, they also confessed to a lack of succession and conflict-resolution plans, a situation that could undermine their long-term sustainability.
Our family of six recently returned from a once-in-a-lifetime trip to South Africa and Zambia. We enjoyed the beauty of Cape Town and its neighboring winelands, the amazing wildlife on safari in Kruger National Park and the powerful sprays of Victoria Falls along the Zambezi River. Everywhere we went, “family” was ever-present. Our tour group, Micato, the vineyards in Stellenbosch and the luxurious lodges in the safari parks are all successful, multigenerational family businesses.