will you succeed at succession? green mountain business expo, stowe
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Will You Succeed at Succession?
Nov 4, 09
For today
What makes family business unique? Family Business 101The Succession ChecklistResourcesFinal exam
If you learn only two things today…
1.Start planning now! 2.Involve others.
What is a family business?
Any business where the family has effective control over the strategic direction of the business;
The business contributes significantly to the family’s wealth, income, or identity;
Future plans consider succession of the business to the next generation.
What makes family business unique?
Presence of familyOwners dream to keep in family Overlap of
Family Ownership Employment
Unique sources of competitive advantage
Unique challenges facing family business
Unqualified family members in key positions within the company.
Communication of business issues is difficult enough, however layered with challenging family matters, often communication completely breaks down.
Marriage and divorce plays a key role in family business success and failure.
Involvement of family members not employed by the company.
Family members in ownership versus management positions.
Family business facts
CONSTITUTE 80–98% of businesses in U.S. and other free economies
GENERATE 49% of GDP in U.S. and more than 75% in most other countries
EMPLOY 59% of private sector U.S. workforce and more than 85% of working population overseas
CREATED about 80% of all new jobs in the 1980s and 1990s
Recent family business surveys
2007 Laird Norton Tyee “Family to Family”
2007 American Family Business Survey
2008 Northwest Family Business Survey
2009 Barclays “Family Business in Safe Hands?”
2009 KPMG Family Business Australia3-9
LNT 2007 Family to Family
Family businesses are thrivingSuccession issues immanentPerception not realityAll in the family? Income diversification
3-10
2007 American Family Business
Optimistic about growthLack a sense of urgency about
planningSelecting women leadersHigher ethical directionTraditional management toolkitCommon family valuesTrust of advisors
3-11
2008 LNT NW Family Business Survey
Incorporating needs of stakeholders leads to greater success
Succession planning still neededLack income diversification Family business boards add value to
the firm
3-12
2009 Barclay’s “In Safe Hands?”
Possess certain attributesPhilanthropy and close relationship
with societyFamily relationships are a double
edged swordExternal management can be a
powerful toolPlanning for next gen is critical
3-13
2009 KPMG Family Business Australia
Structures and mechanisms in placeStrength & resilience is a “strength”Growth & progression is steady
1-15
Entrepreneurs and Business Owners“Business owners make up 17.9% of
the population, yet account for 25% of all income and own 56% of all wealth.”Source: Quadrini, V. (September 2, 1999). “The importance of entrepreneurship for wealth
creation and mobility.” Duke University, Fuqua School of Business.
Family Business Facts
Most current family businesses in the U.S. were formed after World War II. Fully 91% of family business CEO’s are age 42 or older, and 11% are 71 years or older.
42.7% of family-owned businesses will change hands-to be transferred to other family members or sold to others-in the next five years.
1-17
Good news…bad news…or just news? In their first 5 years of operation,
approximately 85% of entrepreneurial and family-owned companies disappear
Among those that survive, only 30% are successfully transferred to the second generation of the founding-family owners
Only 12% survive under current ownership to the third generation
Less than 45% make it to the 4th generation
The Three Circle Model
Vermont Family Business Initiative
The Developmental Stages of the Ownership System
Vermont Family Business Initiative
ControllingOwner
Sibling Partnership
CousinConsortium
The Next Generation
More than 34 percent of U.S. family firms surveyed report that the next CEO may be a woman.
25% of senior generation family business shareholders have not completed any estate planning other than writing a will.
20% of current owners are not confident of the next generation’s commitment to their business.
Women in FOB’s
Roles are finally changing to allow opportunity for females to assume to roles of leadership and ownership.
More than 34 percent of U.S. family firms surveyed report that the next CEO may be a woman.
They do more with less…. Source: The Center for Women’s Leadership at Babson College Women in Family-
Owned Businesses Research Report
Why are family businesses important?
Vermont is primarily made up of small businesses, many of which are started by entrepreneurial families.
Family businesses are deeply embedded within the social and economic fabric of their surrounding community.
Family businesses are committed to continuity.
Oldest family business in the U.S.?
Oldest family business in US
Oldest family business still operating in the US: Zildjian Cymbal Co., Norwood Mass. Founded in 1623 in Constantinople. Moved to the US in 1929. Currently in 14th generation of
ownership. Craigie Zildjian is the first woman to lead
her family’s business.
Largest family business (revenue)
Company Industry Sales ($bil) State Founded
Wal-Mart Discount retail $378.8 Ark. 1945
Ford Motor Automotive $172.45 MI 1903
Koch Ind. Holding company $98.0 KS 1928
Cargill Inc. Commodities $88.26 MN 1865
Carlson Cos. Inc.
Travel, hotels, food $37.1 MN 1938
1-26
Examples of Family-Controlled Businesses
Wal-Mart New York Times Wall Street Journal Washington Post American Greetings Bigelow Anheuser-Busch L. L. Bean Gap Timken
Ford Motor Fidelity Investments Marriott Hallmark Levi Strauss Kohler Nordstrom Perdue Farms Smucker’s SC Johnson
Goals – Business owner
Time line Financial consideration and realityLifestyle choicesManage the plan.
Goals – Business leader
EmployeesPartners/investorsBusiness continuity
Clearly define stage of business
How does it relate to owners exit goals? Early/founder – planning tool Growth – Added value and
contingency Mature – Continuity and legacy Decline – Graceful exit
Business Valuation
Provide honest informationChoose an accredited valuation
analysisCost - $5,000 - $10,0004 - 8 weeks to complete
Assemble your transition team
Professional advisorsFamilyPeersBoards of advisors
Explore options
Keep in family Gifting Trusts
Buy-sellOutright saleInternal sale
Contingency plans
DeathDisabilityKey-personLoss of business valueFailure to secure sound management
or transition team
Identify successor & future management
Key positionsTools needed to succeedDevelop skillsAmple timeCommunicate plans
Develop actual plan – written & documented
Stick to goals and time lineShare with othersManage the plan
Personally Professionally
What will you do when you exit?
EXIT!!! LEAVE!!! GET OUT OF THE WAY!!!OR….
…START A NEW BUSINESS!
FINAL EXAM
TWO THNIGS
START TODAY INVOLVE OTHERS
What is the Vermont Family Business Initiative?
Founded in 1996 in the UVM Business School.
Provides a series of family business forums throughout the state.
Currently 30+ member business in Vermont, from Bennington to Newport.
Family owned and closely held.
Additional resources
Family Business Daily Feed www.twitter.com/fambiz2point0
Family Business Wiki www.familybusinesswiki.org
Family Business Town Square www.familybusinesswiki.ning.com/
Family Business Magazine www.familybusinessmagazine.com
Contact
Dann Van Der Vliet www.uvm.edu/familybusiness 802-656-5897 Daniel.vdv@uvm.edu www.facebook.com/vbc.vfbi www.twiiter.com/fambiz2point0
Presentation is available at: http://www.slideshare.net/dvdv
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