Link This |
Email this |
Blog This |
Comments (3)
Conflicted About Handing Over the Family Business?
January 15, 2007
Dear Suzanna: I’m a 70 year old CEO of a successful 2nd generation family construction business, and my family wants me to retire.My son wants to take it over and is offering to buy me out just like I bought out my dad. He’s a smart kid and he’s been involved in the company for over fifteen years, but I have mixed feelings about his readiness.I’d like to work until the day I die, but he wants to be the boss. My wife says we should take the money and run.Any advice?
-Bury Me in My Hard Hat
Dear Hard Hat:
Is this really a financial issue? Statistics show that only 35% of family owned businesses make a successful transition to the next generation, and one of the main reasons is that the leader didn’t select or train a successor early enough or effectively enough.* Why don’t business owners do this? It’s usually because they are concerned that the business won’t be able to run without them, that their experience and input will not continue to be valued, or that they will not be able to retire comfortably.
I’m guessing from your comment about taking the money and running that you’ll have sufficient assets for your retirement. Therefore, without knowing any specifics about your firm, your son, or your personality, I’d venture to say that you might be having trouble letting go.And why not? Even if you inherited a company, you paid for it and you spent a lifetime building it, so of course you don’t want to walk away.It’s your baby!
Sometimes, selling or turning over a business is like raising a child. You work hard to help them be self-sufficient but then you have to deal with them not needing you anymore, darn it.
Ask yourself, “Do I want my business to be successful after I’m gone?” If the answer is yes, the best thing you can do is to systematically give your son the tools to take over. Consider transitioning the firm the same way that good parents raise kids – gradually. Unless you are in bad health, you can stay involved in the company without actually having to be the one in charge. You can design, or rewrite, a buy-out agreement however you like, giving you financial freedom, and similarly, you can create a succession plan that prepares both you and your son for a transfer of management over a period of time.
Just a few other important things: Be sure that you’ve transitioned ownership to your son formally and according to a well-thought out plan that has been approvred by your lawyer, so that you don't get hit with adverse income, gift, or estate taxes.
And secondly, buy a fishing pole.You might just get used to retirement once you’ve given it a chance.
*American Society of Chartered Life Underwriters and Chartered Financial Consultants
Suzanna de Baca is President of Private Capital Solutions Group, a financial and investment firm in Des Moines, Iowa.She is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667.Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.
PAS is a member NASD, SIPC.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.
Posted by Suzanna de Baca on January 15, 2007 | Comments (3)
