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APR
14
Family Business Survival Guide (October 10th, 2013)
Too often, a family business gets frittered away when it passes to the next generation. Once a founder is gone, one solution is for the descendants to bring in a team of experts to handle matters like management succession, taxes and asset protection. (This is the first of two articles looking at succession planning in small businesses.) My grandfather sold his patented cleaning solution door-to-door to business owners. His solution could clean anything: floors, cabinets, machinery, carpet, even a car. The cleaner was even environmentally friendly long before this was a buzz word; my grandfather cleaned his teeth with the solution to prove this to buyers. Through the 1960s and 1970s he was a successful entrepreneur. Then a car killed him while he was crossing the street. This devastated the family. Then the squabbling began. The business's income had spoiled the children and even the grandchildren. Most of the children enjoyed artificial titles and drew an income from the business. They showed up for work every day but with little to do, knowing neither the customers nor how to make the cleaner. My grandfather failed to implement a succession plan for his business and patent. The children argued over who would run the business, though none of them understood how to do it. They agreed on a couple of issues, such as firing the sales and operations managers – who both ran the company better than they could. Next went the chief financial officer because Uncle Bill had a friend from community college who could handle the books. The business soon lost its best commercial accounts and failed. The family sold the patent for a pittance of its worth just a few years before. Could an expert team have saved my grandfather's company and our family financial security? A corporate attorney insisting on a succession plan? A wealth manager helping grow finances outside the business? An estate attorney drawing up trust documents and making the wealth last? A life insurance agent ensuring that my grandfather's policies covered the estate tax due and potentially even leave a larger legacy? A certified public accountant and personal attorney to handle and minimize estate tax? Any successful business owner knows the value of experts. But since the Great Recession, most owners wear many hats and lack time to build their expert team. Research shows that generalists constitute most business owners' teams – generalists who take on any client in the pursuit of profit. Your team members must specialize in working with business owners. A good wealth manager who specializes in helping business owners is invaluable. The wealth manager usually can help you assemble an expert team: CPAs proactive in business tax mitigation and cash flow planning; attorneys knowledgeable about asset protection and estate planning; insurance agents versed in designing appropriate coverage to protect your business and help you leave a legacy. The manager's Rolodex also includes business bankers, business valuation and appraisal experts, even experts to help you improve profitability and lower your cost structure. Such a team gives you the chance to guarantee success of your business and leave the legacy you've worked hard to achieve. Have a plan in place so you don't end up like my grandfather and our family. Disclosure: While these strategies are useful for some, they may not be suitable for all business owners.


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Thompson Wealth Advisors
Scott Thompson, CSRP
Business & Estate Consultant
704-878-6112

scott@thompsonwealthadvisors.com

 

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