Using EmployEE Benefits for Business (EmployER) Succession

Join us for a discussion to learn how the Next Generation can afford to buy the Family Business.

Most closely-held, family-owned, private businesses employ the owner(s).

Dollars that the business allocates to an owner are not very tax efficient or cost effective. They are not deductible and the value associated with them is included in the owner's taxable estate.

The same dollars allocated to selected key employee(s) are either tax deductible or estate tax free.

Herb will define and explain a process that shows conventional wisdom of the seller “bonusing” the necessary funds to the buyer may actually be a tax Inefficient way of doing it..

Read Herb’s White Paper and join The Network of Family Businesses for a virtual educational Webinar on Thursday, April 25^th, 2013 at 11:00 AM EST, with Herb.

Herbert K. Daroff, J.D., CFP(R) Herb is an attorney by education and very proud to be a financial advisor by profession. He heads up Estate and Business Planning for Baystate Financial Services in Boston where he provides custom case design and is also available on a consultation basis. He has been actively involved in the financial services industry since 1973. Herb is on the faculty at Bentley University in Waltham, MA.

Mr. Daroff graduated from Drexel University with a B.S. in Commerce and Engineering in 1975, and Temple University - School of Law with a J.D. in 1979.

Herb is very active in volunteer efforts in his community and the financial services industry. He is Past President of the Greater Boston Chapter of the International Association for Financial Planning (IAFP, now the Financial Planning Association, FPA) and served as a member of the national IAFP Ethics Committee. Herb’s creativity, experience, and resourcefulness enable him to work very well with clients and their professional advisory team in order to implement responsive solutions for financial objectives.

Registration to join The Network of Family Businesses and be eligible for the On-Line Educational Seminar is available at: http://www.netfamilybusiness.com

For additional information email: steve@netfamilybusiness.com

Family 4 Generations

            I recently read an article that described the recent phenomenon that many businesses now employ as many as four different generations in their company. 

            These include:

     1.     Traditionalist (born between 1925 and 1942)

     2.     Baby Boomers (born between 1943 and 1960)

     3.     Generation Xers (born between 1961 and 1981)

     4.     Millennials (born between 1982 and 2004)

If this phenomenon can be found in businesses in general, it certainly also applies to family businesses.  How exciting for 3 or 4 generations of the same family to be working together to create a family legacy. 

But as with all new situations, there can be upsides and downsides.  Traditionalists may be unable or unwilling to change their methods or ideas, but may still wield significant power in the business.  GenXer’s may refuse to acknowledge ‘proven, tried and true’ methods that have previously served the company so well, bringing in new technology and new strategies.  Millennials are embracing totally new styles of communication and employment.  Baby Boomers may be caught in the middle, trying to embrace change and also acknowledge the facets of the business that have worked so well in the past. 

It’s a challenge for all generations to work to compliment styles and not let our differences tear apart both the family and the family business.

What generational challenges are you experiencing in your family business?

How has those differences impacted your family communications?

Telecommuting – what’s your opinion? By Guest Blogger – Kathy Moyer

Telecommuting has suddenly become a hot topic these past few weeks as Yahoo’s CEO Marissa Mayer announced through a HR Memorandum to her employees that there would be no more telecommuting at Yahoo – period.  Shockwaves reverberated throughout the media and business world, but I’m sure they were mild in comparison to the shockwaves that must have been felt at Yahoo.  Let’s face it – Yahoo is an internet company. 

Shouldn’t they be leaders in telecommuting?  Apparently not.

            Marissa’s memorandum indicated that there is a need for all employees to be under the same roof in order to begin producing more creatively.  Apparently she feels that some of the company’s problems are due to the fact that employees don’t have the opportunity to work together creatively unless they are spending time together. 

Does she have a point?

            I remember working in office settings as a high school teen and young adult.  Our desks were in one big room – no partitions, no cubicles, no hiding from everyone.  Everyone saw how diligently you were working and producing.  Everyone overheard your phone conversations.  It forced you to learn to  focus on your own work and overlook distractions.  But the best part for me was that I could observe and take notes and learn from the others in my office.  They shared their knowledge.  They shared their tips and strategies for dealing with problems, they helped me learn how to deal with people, and they became friends.     

        

            When I moved on to  a new job, I found myself in a cubicle.  It felt good to not always have somebody looking over my shoulder, to not be interrupted by others in nearby proximity, to not feeling like I had days where I was constantly being distracted,  but I soon found the cubicle to be isolating.  It was harder to get to know others in the office.  It was harder to collaborate on projects – we were always looking for an open conference room so that we could discuss/hash out  the project/problem and then be able to lay out the project. 

            In telling you all of this, I am trying to relate my “cubicle” experience to that of telecommuting.  Of course, there are upsides to telecommuting – it’s much greener; you can telecommute from almost anywhere in the world, so your employee pool is infinitely greater; it’s lower overhead for the company in terms of necessary office space; it’s great for employees who need to be on call for children or elderly family members, etc. etc.  The list could go on and on.

            But there are some of the same downsides to telecommuting that I experienced in my little cubicle.  Lack of personal involvement, lack of mentorship, lack of camaraderie, etc. etc.

            So how do I view Ms. Mayer’s edict?  Well – she has chosen a “one size fits all” type of approach that I think will only serve to alienate employees.  Not the outcome she is looking for.  Instead, I think a better, more balanced approach would have been to decide which of the positions really need to be “in office” to generate the creativity/productivity she is looking for, while leaving the other positions open to telecommuting.   

Discernment is a quality of a true leader

The Ultimate Competitive Advantage

How does a Business Family make sure the right people are in the right seats?

Bruce Clinton strongly believes one of the least developed assets in most businesses, including Family Businesses, is the people. In this challenging economic climate he states this has become more evident to many business owners who have experienced: flat or lower sales, morale issues and in some cases the loss of top producers. With Family Businesses trimming overhead, maximizing technology, outsourcing non-essential services, and instituting tighter controls, there is one area that Bruce believes has been omitted. That one area that has been omitted by most that will provide businesses with an ultimate competitive advantage…the ability to obtain and retain top producers at all levels of their organization. 

Bruce will define and explain a process to get the right people in the right seat with a high return on investment proactive process.

Read Bruce Clinton’s White Paper and join The Network of Family Businesses for a virtual educational Webinar on Thursday, March 21^st, 2013 at 11:00 AM EST, with Bruce.

Bruce G. Clinton is the founder of BusinessWise, LLC, an executive coaching and consulting firm, which specializes in helping entrepreneurial organizations solve the “people challenges” associated with growth and succession by installing timeless leadership processes to obtain and retain top producing talent at all levels of the organization. He is a co-founder of ASearch, LLC a retained search firm that takes a unique organizational development approach to find key people. Bruce is an expert in organizational leadership, management and development, having spent over thirty years as a consultant in the field. He has run many seminars in management / leadership skill development. He is a noted author and speaker who appeared on numerous national convention programs.

Registration to join The Network of Family Businesses and be eligible for the On-Line Educational Seminar is available at: http://www.netfamilybusiness.com

For additional information email: steve@netfamilybusiness.com

What will the Next Generation say?

Many founders of businesses who have the intent of passing the business to their children find it difficult to develop a plan and a process for the development of the next generation and the subsequent transition of the business to the next generation.

The founder’s heart is generally in the right place in their desire for the next generation to take over the business, make the right decisions, and accept the responsibility. Statements and comments frequently made by the senior generation may include why don’t they tell me what they want to do; what do they want; why won’t they just step up and take responsibility, or what do they expect of us?

In subsequent conversations with the next generation, they state, why doesn’t Dad / Mom just tell us what they want, which one of us will be president, when will they retire, or what will they do when they retire?

What was intriguing in those conversations was the fact that in most cases the next generation was often not given opportunities to learn how to make critical long-term strategic decisions and did not have / or participate in family council meetings to learn how to analyze both family and business issues. In some situations the next generation did not have the opportunity to learn how to operate the business.

It is critical for the senior generation to consciously and specifically help the next generation grow. The next generation needs to gain the expertise, experience, mentoring, tacit knowledge, passion, and internal drive to continue building the family legacy. The next generation needs to hear praise, encouragement, appropriate guidance and the confidence of the senior generation. When the proper plans, processes, and guidance is in place by the senior leadership, the next generation can continue building the legacy.

"A leader is best when people barely know he exists, not so good when people obey and acclaim him, worst when they despise him. But of a good leader, who talks little, when his work is done, his aim fulfilled, they will say, 'We did this ourselves.'"

— Lao-Tse

 What have you / are you doing to prepare the next generation?

What will the next generation say?

In many situations the help of an outside facilitator can help guide the process. If you would like to discuss this in more detail, please email me.

skmoyer@comcast.net            

TRAPPED IN THE FAMILY BUSINESS

Really?     Trapped??

“While running a business every day with family members can be rewarding, it can also be fraught with unique stresses and ambiguous roles that non-family employees and leaders never face,” says Michael A. Klein, PsyD. “Relatively little attention has been paid so far to the common mismatch between individual interests, needs and abilities and a person’s role in their family business.

For some individuals, working in a family business can be an incredible gift.  For others, the family business is a prison, without any chance of parole.  For those who are feeling trapped in the family business, ownership of the business is more burden than pleasure.  The freedom that their family business allows is overshadowed by a lack of business process and clear structure.  Having their name on the door is not worth being “on call” 24/7, or never being able to really take a vacation.

Sometimes it is easy to know that we are trapped…we feel it.  However, other times…

He compares the situation to arranged marriages: “When parents decide or pressure their children, consciously or unconsciously, into working in the family business, it's the same as telling them who they must marry—these decisions might be best for the family, but are rarely made, if ever, in the best interest of the individual.”

Read Dr. Klein’s White Paper and join The Network of Family Businesses for a virtual educational Webinar on Thursday, February 21^st, 2013 at 02:30 PM EST, with Dr. Michael A. Klein.

Michael Klein, PsyD. is a business consultant and author of the book Trapped in the Family Business^®. He holds a doctorate in psychology.  Michael works as a consultant, facilitator, and speaker for family businesses and their advisors providing assistance in the hiring and development of leaders, managers, and employees. He has over 15 years of experience working in industries including manufacturing, insurance, healthcare, construction, financial services, education, pharmaceuticals, real estate, and entertainment. Michael is member of the American Psychological Association (APA) and the Society for Industrial and Organizational Psychology (SIOP). More information is available at: mkinsights.com and trappedinthefamilybusiness.com.

Registration to join The Network of Family Businesses and be eligible for the On-Line Educational Seminar is available at: http://www.netfamilybusiness.com

For additional information email: steve@netfamilybusiness.com

Advisors

Do you have a trusted advisor or a team of trusted advisors? 

 I do. – For me, they include my financial advisor, my relational advisor, my spiritual advisor, my “construction” advisor, and the list goes on.  Some are professional and some are trusted friends, but I count on them to all give me solid information, honest feedback and sound advice.

Then the question becomes – what do I do with that advice?

I listen, evaluate, test it with my team of advisors, and square it up with my own ideas.

Then and only then, can I make a decision. 

My decision.  But I have learned that I really need to listen to my trusted team of advisors.  They know me, give me new information, different perspectives, an unemotional approach, and they truly want the best for me. 

Would I ever consider adding a new room to my house without talking to my contractor?  Would I ever consider changing my estate without talking to my estate attorney?  No.  I value their knowledge and know they will help me make the best decision possible. For a Business Family the team of advisors should include the business systems, the family systems, and the ownership system.

 Do you have a group of trusted advisors in your personal and professional life?  Don’t neglect building and nurturing those relationships.  They will serve you well as you navigate the issues of life and business.  

If you would like to learn more about building a solid team of advisors, let me know.

Governance Issues for Closely Held Corporations and Family Businesses

To the typical challenges that all commercial enterprises face, there are a few additional ones that accrue to closely held corporations and family-owned businesses. This seminar presentation addresses these challenges, explores their genesis and points to options that can attenuate their most pernicious effects. By these reckonings, closely held corporations can level the playing field and compete head-to-head with firms characterized by widely distributed and even public ownership.

Pressing the firm’s competitive advantage in the marketplace depends on capably prosecuting a portfolio of complex, interrelated value-creation and risk-attenuation tasks. The judgmental component of these decision tasks is very demanding.  Without the Board having been conferred with a superior decision making capability – it is unlikely that the firm can optimize its competitive positioning. The absence of outside or independent directors tends to elicit greater fiduciary liability. This factor derives from both the market perception of fallible judgment that derives from non-independent boards – and from the reality that non-independent boards are rarely able to “challenge the boss” and thereby widen the domain of alternative courses of action.

Read Dr. McDaniel’s White Paper and join The Network of Family Businesses for a virtual educational Webinar on Tuesday, January 22^nd, 2013 at 11:00 AM EST, with Dr. Richard McDaniel of Fiduciary Guaranty Corporation of America.

This discussion will explore unique challenges to Family Businesses, the fallibility of human judgment and its consequences, and new directions for the modern Family owned business.

Dr. McDaniel is the primary creator of the discipline of Decision Accounting™ and the Ad Hoc Decision Audit™ Technology upon which it is based. 
Dr. McDaniel was one of five inside advisors to, and representatives of, H.L. Hunt of Dallas (Hunt Oil Company). His past positions include: President and Chief Operating Officer of Mortgage Banc of Dallas; Regional General Sales Manager for Pulte Home Corporation in Dallas/Ft. Worth. Richard graduated from Harvard College and earned a Ph.D. in experimental psychology from the University of Texas (Arlington).

Registration to join The Network of Family Businesses and be eligible for the On-Line Educational Seminar is available at: http://www.netfamilybusiness.com

Creating A Family Legacy Continuing This Year

IF a Matriarch or Patriarch builds a successful business yet has no long-term impact on his or her family, did they build a family legacy?

As this question implies, family is crucial in building a family legacy. A legacy is established by leaving something of enduring quality behind for family and for the business. It is not just up to the senior generation to create and build a legacy, every family member has the opportunity to contribute based on his or her own experiences and insights. To do so, however, requires a consciousness and intention to build and nurture the family values, commitment, and faith. Each individual’s contributions may be an incremental movement toward the legacy yet to capture the valuable experiences for future generations requires long-term, ongoing building, living and leaving a legacy.

In a Will and a Trust, a legacy is a bequest, something of value handed down to someone else. Family legacies are built over time and have a living quality. Family legacies grow and change as each generation builds on the past and contributes to the future.

A family legacy must be digested and absorbed before it can be passed on. Building a legacy and living it requires active participation by all family members. It is meaning gleaned by the next generation from the senior generation through intentional interaction and dialogue and observation.

Overemphasizing the leaving aspect of legacy and underemphasizing the building and living aspect is easy to do. Each and every family member can build and live the family legacy at any age.

When legacy building becomes part of a Family’s culture it can serve a critical role for future generations. Legacy is a valuable gift for a family but is only possible when each and every family member is aware of the powerful legacies they have to offer.

How are you helping to build your family’s legacy as we move into a New Year?

I would love to hear how you are doing this with your family or discuss ways you and your family can make a conscious effort to build your Family’s Legacy.

The Intersection

A few weeks ago, the entire country was talking about the latest Powerball jackpot – over one-half billion dollars – a staggering amount for most of us.  News reporters loved interviewing and asking the public what they would do with such a windfall.  Overall, we seem to be a fairly generous nation, promising if we would win, we’d take care of family, friends and others, or make large contributions to our favorite charities.  But we were also warned how easy it is to lose all of that money by not getting the proper advice on how to distribute that vast wealth.

Well – unfortunately, I didn’t win, but that doesn’t mean I don’t want to make contributions to my favorite charities and I’ve got to be just as careful to do it wisely as the lucky Powerball winners. Teresa Araco Rodgers (www.harp-weaver.com) December's speaker on the Network of Family Businesses (www.netfamilybusiness.com) provided valuable insight on why it is so important for Business Families to use the proper vehicles when making contributions.  Teresa helped us understand how it can be so meaningful for both family members and family business employees to be involved in the process of giving. 

No family business is too small or too large to not explore the best ways to make their contributions.

At this special time of year, may we all take the time to remember those less fortunate and support those organizations that serve. 

You will be blessing them and you will be blessed as the giver.  

Season's Greetings

Merry Christmas 
and 
Happy New Year

Preconceived Ideas May Be A Limiting Factor by guest Contributor - Kathy

This past weekend I had a new job –CBO (“Chief Babysitting Officer”) for our two little granddaughters.   After raising two boys, I was thinking I would have to switch gears to make sure I had some activities planned that would appeal to little girls.  How did I do?  Well – some things I thought they would enjoy were a hit, like my old dollhouse that I drug out of the attic and then a few sticker crafts. 

But they surprised me too. 

They were much more interested in playing outside, riding tricycles, checking out the chickens, sitting on the tractor.  And the books I thought they’d love (kittens and sweet things) were the least favorite.  They wanted the books about driving trucks, everyday activities like bath-time and finding the hidden pictures.  Well – it all worked out and we had a great time.  But I learned I had to be flexible and not stick with my preconceived ideas about who they are and what they wanted to do. 

By spending time together and talking and listening to each other, we found many different ways to have fun together and enjoy each other’s company.

So how does this relate to family businesses? 

Isn’t it the same?  We all have preconceived ideas about how the next-gen should be preparing to take over the business as well as preconceived ideas about how they should actually run the business. But they have their own ideas. 

How do we learn what their ideas are?  By spending time with each other on a regular basis – both in and outside of the business and by actually listening to each other.  And then being honest enough to evaluate everyone’s thoughts, ideas and concerns and coming up with the best plan for both the business and the family. 

True success for a business family means both success in the business and success in the family.

The Intersection of Family Philanthropy and Business Philanthropy

Think about walking past the community soccer fields on a Saturday morning. The fields are packed with children running around in bright colored shirts. Take a closer look and you will probably notice the names of companies on those shirts – those companies are probably family-owned businesses supporting the community in which they live and work.

Family owned businesses are crucial to our economy in terms of creating jobs, generating wealth and building community. According to Family Enterprise USA, there are 5.5 million family-owned businesses in the United States. What is astounding about these businesses is that according to that same study, 95% of them are engaged in philanthropy.  That is a lot of soccer shirts!

Corporate philanthropy (whether a business is family-owned or not) has been in the midst of change for quite some time now.  To simplify, what has emerged are three ways of thinking about the outward expression of company values.  These are philanthropy, community involvement and social innovation.  When combined, these practices ultimately define the company’s culture and, in the case of a family-owned business, they define the family’s culture and those things they deem important. 

The Network of Family Businesses is excited to present this Webinar scheduled for Thursday, December13^th, 2012 at 10:00 AM EST, with Teresa Araco Rodgers, CAP® President and Founder of harp-weaver LLC.

This discussion will explore emerging practices, Philanthropy considerations, and questions your Family should be considering.

Teresa Araco Rodgers began her career at SEI, a global provider of asset management, investment processing and investment operations solutions.  Teresa founded harp-weaver LLC in 2010 because she wants to give donors a better way to add meaning and align gifting with personal, family and financial goals.  Her mission is to inspire others by helping them articulate their values and passions to be purposeful givers. With more than 10 years of grantmaking experience, Teresa works with clients in the Greater Philadelphia area, supporting donor interests professionally, ethically and cost-effectively.  As a "network weaver," Teresa brings people and organizations together to address issues of concern and enables donors to be more strategic with their charitable dollars and more fulfilled with their involvement.

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Be Thankful for what you have,

                                   not what you don’t have.

What does it take to be an entrepreneur? A Mustache and a Dream. by guest blogger Aaron Cargas

When Chip Cargas started Cargas Systems, Inc. (my employer), it was 1988, and all he had was a Macintosh computer, a mustache, and a dream. On second thought, he also had an Ivy League education, and years of experience as an engineer, manager, and human resources executive.

What did he lack? He didn’t have any marketing or sales experience; nor did he have any accounting or financial knowledge, key skills if you are starting a business by yourself with no customers. The eighties were coming to an end, and Chip realized the days of covering up what you didn’t know by having stellar facial hair were soon to be over. So he gave himself a crash course in the areas of business where his knowledge was light.

He took some sales and marketing courses and learned enough to do the simple marketing to get him to the point of landing his first customer. Even though he wasn’t a typical salesperson, he learned the basics of building and managing a pipeline, doing the necessary follow up, creating proposals, and doing good presentations. He learned enough to build the business to the point where he could hire someone with natural sales talent.

He also read the Accounting for Non-Accountants book and learned the basic accounting needed to run a business. He became very proficient at building budgets, working with financial models, and dealing with banks. He ended up with a fundamental understanding of accounting that would rival a CFO’s knowledge in many companies.

You can learn a lesson from Chip and his mustache; managers, executives, and entrepreneurs should strive to have a working knowledge of all areas of business. Even if you are not starting your own business, this broad knowledge will help you understand what’s driving the motivations of all areas of your company. Too often people pigeonhole themselves and then become small minded defenders of the narrows interests of their own discipline. It’s great to be an expert, but it’s better to be an expert with a broad understanding of business.

Chip ended up shaving his mustache in the nineties as if to tempt fate and test the mettle of his newfound skills. The company continued to grow, so this proves the theory that well-rounded business knowledge trumps well maintained whiskers. So take a lesson and become well versed in all aspects of business. Then when you do decide to grow an awesome mustache, it will simply be icing on the cake.

Aaron Cargas is a board member and one of many employee owners at Cargas Systems, an employee owned business software and consulting firm. He has been writing on leadership, management, and entrepreneurial topics since 2003. Read Aaron’s blog at http://ManagerialMayhem.com and follow Aaron on Twitter @ManagerialMayhm.