Will You Succeed at Succession? Green Mountain Business Expo, Stowe


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You are a successful owner. You motivate your employees, manage projects and utilize the resources available to you in your business and networks. You are entrepreneurial, always looking for new ways to grow and transform your enterprise. You have a long range vision of success for your business and personal future. Do you also apply these same passions and principles to planning your own exit from the business?

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  • Common perceptions: Mom and pop type storesConflict and fightingMafia
  • 71% of companies have no qualifications for family employment36.7 % have written strategic planOf those staying in family, 85% have selected a family member to lead in next generation54% have shareholder agreements (“buy-sell”)38% have liquidity planMore than 50% have regular formal valuationsBoards in less than 50% cases meet more than once or twice a year
  • Will You Succeed at Succession? Green Mountain Business Expo, Stowe

    1. 1. Will You Succeed at Succession? <br />Nov 4, 09<br />
    2. 2. For today<br />What makes family business unique? <br />Family Business 101<br />The Succession Checklist<br />Resources<br />Final exam <br />
    3. 3. If you learn only two things today…<br />Start planning now! <br />Involve others. <br />
    4. 4. Perceptions…<br />
    5. 5. What is a family business? <br />Any business where the family has effective control over the strategic direction of the business;<br />The business contributes significantly to the family’s wealth, income, or identity; <br />Future plans consider succession of the business to the next generation. <br />
    6. 6. What makes family business unique? <br />Presence of family<br />Owners dream to keep in family<br /> Overlap of<br />Family<br />Ownership<br />Employment<br />Unique sources of competitive advantage<br />
    7. 7. Unique challenges facing family business<br />Unqualified family members in key positions within the company. <br />Communication of business issues is difficult enough, however layered with challenging family matters, often communication completely breaks down. <br />Marriage and divorce plays a key role in family business success and failure. <br />Involvement of family members not employed by the company. <br />Family members in ownership versus management positions. <br />
    8. 8. Family business facts<br /><ul><li>CONSTITUTE80–98% of businesses in U.S. and other free economies
    9. 9. GENERATE49% of GDP in U.S. and more than 75% in most other countries
    10. 10. EMPLOY 59% of private sector U.S. workforce and more than 85% of working population overseas
    11. 11. CREATED about 80% of all new jobs in the 1980s and 1990s</li></li></ul><li>Recent family business surveys<br />2007 Laird Norton Tyee “Family to Family”<br />2007 American Family Business Survey<br />2008 Northwest Family Business Survey<br />2009 Barclays “Family Business in Safe Hands?”<br />2009 KPMG Family Business Australia<br />3-9<br />
    12. 12. LNT 2007 Family to Family<br />Family businesses are thriving<br />Succession issues immanent<br />Perception not reality<br />All in the family? <br />Income diversification<br />3-10<br />
    13. 13. 2007 American Family Business <br />Optimistic about growth<br />Lack a sense of urgency about planning<br />Selecting women leaders<br />Higher ethical direction<br />Traditional management toolkit<br />Common family values<br />Trust of advisors<br />3-11<br />
    14. 14. 2008 LNT NW Family Business Survey<br />Incorporating needs of stakeholders leads to greater success<br />Succession planning still needed<br />Lack income diversification <br />Family business boards add value to the firm<br />3-12<br />
    15. 15. 2009 Barclay’s “In Safe Hands?” <br />Possess certain attributes<br />Philanthropy and close relationship with society<br />Family relationships are a double edged sword<br />External management can be a powerful tool<br />Planning for next gen is critical<br />3-13<br />
    16. 16. 2009 KPMG Family Business Australia<br />Structures and mechanisms in place<br />Strength & resilience is a “strength”<br />Growth & progression is steady<br />
    17. 17. 1-15<br />Entrepreneurs and Business Owners<br />“Business owners make up 17.9% of the population, yet account for 25% of all income and own 56% of all wealth.”<br />Source: Quadrini, V. (September 2, 1999). “The importance of entrepreneurship for wealth creation and mobility.” Duke University, Fuqua School of Business.<br />
    18. 18. Family Business Facts<br />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. <br />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. <br />
    19. 19. 1-17<br />Good news…bad news…or just news? <br />In their first 5 years of operation, approximately 85% of entrepreneurial and family-owned companies disappear <br />Among those that survive, only 30% are successfully transferred to the second generation of the founding-family owners<br />Only 12% survive under current ownership to the third generation<br />Less than 45% make it to the 4th generation <br />
    20. 20. The Three Circle Model<br />Vermont Family Business Initiative <br />
    21. 21. The Developmental Stages of the Ownership System<br />Cousin<br />Consortium<br />Sibling <br />Partnership<br />Controlling<br />Owner<br />Vermont Family Business Initiative <br />
    22. 22. The Next Generation<br /><ul><li>More than 34 percent of U.S. family firms surveyed report that the next CEO may be a woman.
    23. 23. 25% of senior generation family business shareholders have not completed any estate planning other than writing a will.
    24. 24. 20% of current owners are not confident of the next generation’s commitment to their business. </li></li></ul><li>Women in FOB’s<br />Roles are finally changing to allow opportunity for females to assume to roles of leadership and ownership. <br />More than 34 percent of U.S. family firms surveyed report that the next CEO may be a woman. <br />They do more with less….<br />Source: The Center for Women’s Leadership at Babson College Women in Family-Owned Businesses Research Report<br />
    25. 25. Why are family businesses important?<br />Vermont is primarily made up of small businesses, many of which are started by entrepreneurial families. <br />Family businesses are deeply embedded within the social and economic fabric of their surrounding community. <br />Family businesses are committed to continuity. <br />
    26. 26. Oldest family business in the U.S.?<br />
    27. 27. Oldest family business in US<br />Oldest family business still operating in the US: Zildjian Cymbal Co., Norwood Mass. <br />Founded in 1623 in Constantinople. <br />Moved to the US in 1929. <br />Currently in 14th generation of ownership. <br />Craigie Zildjian is the first woman to lead her family’s business. <br />
    28. 28. Largest family business (revenue)<br />
    29. 29. 1-26<br />Examples of Family-Controlled Businesses<br />Wal-Mart<br />New York Times<br />Wall Street Journal<br />Washington Post<br />American Greetings<br />Bigelow<br />Anheuser-Busch<br />L. L. Bean<br />Gap<br />Timken<br />Ford Motor<br />Fidelity Investments<br />Marriott<br />Hallmark<br />Levi Strauss <br />Kohler<br />Nordstrom<br />Perdue Farms<br />Smucker’s<br />SC Johnson<br />
    30. 30. Some family businesses in Vermont<br />
    31. 31. Goals – Business owner<br />Time line <br />Financial consideration and reality<br />Lifestyle choices<br />Manage the plan. <br />
    32. 32. Goals – Business leader<br />Employees<br />Partners/investors<br />Business continuity<br />
    33. 33. Clearly define stage of business <br />How does it relate to owners exit goals?<br />Early/founder – planning tool<br />Growth – Added value and contingency<br />Mature – Continuity and legacy<br />Decline – Graceful exit<br />
    34. 34. Business Valuation<br />Provide honest information<br />Choose an accredited valuation analysis<br />Cost - $5,000 - $10,000<br />4 - 8 weeks to complete<br />
    35. 35. Assemble your transition team<br />Professional advisors<br />Family<br />Peers<br />Boards of advisors<br />
    36. 36. Explore options<br />Keep in family<br />Gifting<br />Trusts <br />Buy-sell<br />Outright sale<br />Internal sale<br />
    37. 37. Contingency plans<br />Death<br />Disability<br />Key-person<br />Loss of business value<br />Failure to secure sound management or transition team<br />
    38. 38. Identify successor & future management <br />Key positions<br />Tools needed to succeed<br />Develop skills<br />Ample time<br />Communicate plans<br />
    39. 39. Develop actual plan – written & documented <br />Stick to goals and time line<br />Share with others<br />Manage the plan <br />Personally<br />Professionally <br />
    40. 40. What will you do when you exit? <br />EXIT!!! <br />LEAVE!!! <br />GET OUT OF THE WAY!!!<br />OR….<br />
    41. 41. …START A NEW BUSINESS! <br />
    42. 42. FINAL EXAM<br />
    43. 43. TWO THNIGS<br />START TODAY<br />INVOLVE OTHERS<br />
    44. 44. What is the Vermont Family Business Initiative? <br />Founded in 1996 in the UVM Business School. <br />Provides a series of family business forums throughout the state.<br />Currently 30+ member business in Vermont, from Bennington to Newport. <br />Family owned and closely held. <br />
    45. 45. Additional resources <br />Family Business Daily Feed<br />www.twitter.com/fambiz2point0<br />Family Business Wiki<br />www.familybusinesswiki.org<br />Family Business Town Square<br />www.familybusinesswiki.ning.com/<br />Family Business Magazine<br />www.familybusinessmagazine.com<br />
    46. 46. Contact<br />Dann Van Der Vliet <br />www.uvm.edu/familybusiness<br />802-656-5897<br />Daniel.vdv@uvm.edu<br />www.facebook.com/vbc.vfbi<br />www.twiiter.com/fambiz2point0<br />Presentation is available at: <br />http://www.slideshare.net/dvdv<br />