12/ 28/ 2004
by Paul Rich
Running a family-owned or closely-held business is a challenge. It is difficult to keep it up and running. Forty-three percent of family-owned businesses will pass from one generation to the next, thirty percent of those will survive the second generation and less than 15 percent of those will successfully pass to the third generation.
Siegel Rich, the business consulting division of Rothstein Kass Certified Public Accountants, offers the following tips on how to run and pass on a successful family-owned or closely-held business.
Create a Succession Plan: If you have children, encourage them to get involved with the business at an early age if they show an interest. Not all successors are ready to take over when their time comes, consider having a backup plan in case this happens. If there is more than one successor, attempt to resolve any conflicts that may be present and most importantly, trust your successor.
2. Change Ownership Orderly: We recommend having a contingency plan in place so you can take immediate action when the time comes to hand over the business. The plan may include key man insurance, a partner, a trustee who can operate the business, a board of directors, adequate capital and top-level personnel.
3. Take Immediate Action Steps Now: Clean up legal, tax and other corporate issues. Secure your rights to intellectual and tangible property and have proof that you have liquidated prior obligations.
4. Follow Operational Steps: Strive to attract top employees, even if that means spending a little extra money. Enforce employee retention by respecting your employees and offering them incentives to stay with your company. The ability to effectively lead and motivate staff goes a long way to benefit an organization.
5. Focus on Core Business: Stay focused to keep your business running smoothly. Don't be tempted to move outside your core business in search of new opportunities. Instead, constantly build market share by over-servicing your clients and offering incentives to create customer loyalty. Maintain critical data by utilizing analytical reports.
6. Create a Team: Building relationships is an important part of running a business and even more important when selling a business. Strive to put together a qualified team of professionals such as solid board of advisors, an attorney and CPA, among others.
7. Create a Reputation: A company should steadily build its reputation. Branding has become the No. 1 way to achieve corporate identity. Also, get involved in your industry and community events.
8. Be Open-Minded: Running a business is a challenge. Make an effort to find new opportunities for your business by thinking outside the box.
9. Be Aware: Know your company's worth and how you can increase its value to the buyer.
10. Research Potential Buyers: Identify potential buyers who are in position to effectively take over your business. Throughout the process maximize your company's value and in order to prepare for its eventual sale.
If you would like more information on the Siegel Rich division of Rothstein Kass, please visit www.rkco.com.
Paul Rich is a principal with the business consulting division of Rothstein Kass Certified Public Accountants (www.rkco.com). He is a business consultant and specializes in assisting closely- held and family-owned businesses in structuring and negotiating mergers and acquisitions, securing financing, rendering IPOs and private placement advisory services, assisting with succession planning and providing profit-enhancement business planning and executive coaching, among other hot-button areas for small-business owners.
