ABO Developments - Spring 2014 - (Page 19)

SUCCESSION PLANNING TO AVOID LANDMINES, SEEK ADVICE OUTSIDE THE FAMILY BY WILLIAM H. JENNI NGS, CPA T he head of the family-owned development business was confident-there were seven younger family members, and certainly one of them would take over when he retired, ensuring continuity and keeping the operation under family control. A business advisor who was not a member of the family was less certain. He had heard each of the younger relatives express reluctance or doubt. But none of them was willing to say so to the patriarch. In the end the business advisor was right. Not one member of the next generation was willing to take on the leadership role. After having to run the business for an unanticipated two additional years, the founder was forced to transition the ownership to an unrelated third party. Succession planning is a difficult matter in any business. In a family-owned business, the difficulty is, if anything, much greater. Family politics and interpersonal relationships are always challenging-all the more so when the future of a business is at stake. Most family businesses are dominated by one or two strong leaders-often a founder, always an authority figure. These individuals are often willful-in many cases, it was their strong will that established and grew the business in the first place - and they are inclined to make assumptions about the talents and intentions of their children and other younger relatives. They leave succession planning until the last possible moment, confident that someone in the next generation will take over the reins. Their strong feelings and loyalties can lead them to back the wrong horse, settling on a successor who doesn't have the makings of a good future leader. These challenging family dynamics also affect the younger generation. Relatives are often afraid to tell the founder the truth. Do they want to take over the business? When the older relative asks point blank, the younger relatives will "yes" him or her. But when they speak to friends or other outsiders, they'll be honest-"if I take over, I'll sell this thing as soon as I can." They won't level with the person in charge, but they will with a peer or outsider. It's not that they want to deceive-but they are afraid to disappoint. The results can be disastrous. Picking the wrong successor can destroy the business. It can be equally bad to pick no successor at all. Yet this is common. An owner doesn't begin to think Spring 2014 | 19

Table of Contents for the Digital Edition of ABO Developments - Spring 2014

A Message from ABO Executive Director Dan Margulies
BuildingsNY 2014 Bigger Than Ever
Special Education Sessions
The ABO-NYSBA Private Health Insurance and Employee Benefit Marketplace
Succession Planning To Avoid Landmines, Seek Advice Outside t he Family
The de Blasio Administration
Index of Advertisers / Advertisers dot com

ABO Developments - Spring 2014