Specialty Fabrics Review January 2020 - 53

YOU CAN HAVE THE GREATEST TECHNICAL
SOLUTIONS EVER, BUT UNLESS THE FAMILY HAS
AGREED ON THE FUTURE DIRECTION, IT WILL BE
DIFFICULT TO MAKE A SUCCESSFUL TRANSITION.

can bring specific advantages to the business
in the form of loyalty, desire to preserve the
family legacy, carrying on family values and
relationships that provide financial security-
giving you and them peace of mind-and
continued contribution to the community.
At the same time, you may have to deal
with family conflicts of interest, competing
personalities, dissimilar goals and, of course,
egos. By planning properly, you can determine
whether your goals can be carried on and
whether your family has the awareness and
commitment to give its all to the company
you worked so hard to build.
Your process should begin with a series
of conversations with family members-
sometimes individually, sometimes in
groups-to determine whether their
thoughts for the future of the business are
in sync with yours.
A SMOOTHER TRANSITION
Too often, specialists who assist family members
in a transaction concentrate almost exclusively
on the technical side of the transition-taxes,
trust, shareholder agreements, wills, etc.-
when the most important consideration is
assuring family harmony in the future. You
can have the greatest technical solutions ever,
but unless the family has agreed on the future
direction, it will be difficult to make a successful
transition. Here are some questions to consider:
1. What is your timeline? When and how
will the changeover take place? Maybe
your desire is to oversee the transition
and gradually phase yourself out of the
business, but your family wants the change
to happen as soon as everyone agrees to all
the conditions for the transfer.
2. What is each person's role? Clearly
define ownership shares and operating
responsibilities. Who gets what title? Who
is the ultimate decision-maker? Define,
in writing, each person's participation.

Then discuss it, gain agreement and
move forward. It may take some time to
formally develop each person's position
and contribution, but doing so will assure
a successful transition.
3. How long will you stay on, and in what
capacity? This can be a touchy issue because
family members may prefer that you
step away from day-to-day activities and
participate on a consulting basis only. In
general, a clean break is beneficial for all
parties, but there may be certain advantages
you bring to the business-advantages that
are not easily replaced.
4. How will you be compensated? Family
members often buy the business using
cash that the business accrues. Will
family members put in a personal cash
contribution in the beginning? Will you
be paid a lump sum or monthly payments,
or some other form of compensation?
How will the payouts affect your taxes
and those of the company? If you stay on
as a consultant, will you receive regular
paychecks or be paid as called upon?
5. How will reporting be accomplished?
What financial reports will be provided
and how often? It is also important that each
person report regularly on his or her area
of responsibility. This can be as simple as
scheduling a meeting once a week, with one
person moderating, and then allowing each
person a chance to give a progress report.
The truth is that all businesses will change
hands at some point; either you will pass
yours on to family or employees, sell it, or
close the doors. Creating specific answers to
the questions above will help you decide,
objectively, which option is best for you and
your business.
Larry Oxenham is a senior adviser for the American
Society for Asset Protection. He has spoken at both
IFAI Expo and the Marine Fabricators Conference on
the topic of succession planning and effective strategies
for protecting and perpetuating business.

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Specialty Fabrics Review January 2020

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