Tag Archive: generations_at_work

You Inherited a Small Business—Now What?

You Inherited a Small Business—Now What?by Erin McDermott.

Jim Angleton Jr. started attending his father’s company meetings when he was 7 years old. He watched and learned as the venture-capital firm invested in dozens of small companies.

His dad died a few years ago. Though the two had what Angleton described as “very painful, heartfelt discussions” with an estate planner about what the father wanted for the future of his company after he died, crucial decisions needed to made shortly after he passed—and soon.

“There was a seven-figure portfolio, several employees, and about 30 days to decide what to do without my dad,” said Angleton, now 56. “I still miss him so badly.”

Anyone who’s been through the death of a close family member knows how emotionally difficult the days and weeks that follow can be. But when small-business owners die, there’s also a complicated web of issues for their survivors to navigate, especially for those designated to inherit their company.

It’s a gesture of profound trust for person to put the result of their life’s work in your hands once they’re gone. For the new proprietor, there are important immediate decisions to be made regarding banking, licensing, estate taxes, insurance, employees, and more. Eventually, the bottom line becomes clear: Do you want to give it a go—or should you sell?

Often, the answer can depend on how much planning has been done ahead of time.

Many small-business owners get so caught up in keeping their company afloat that they don’t take the time to think about planning for their inevitable exit, says John M. Masnica, an associate attorney at San Diego Law Firm and a business consultant at its reThink Consulting. He advises his clients to not leave it all up to their survivors, but to make these decisions before tragedy strikes.

And then there are the family issues.

“Parents often don’t talk about their plan, or not very thoroughly,” says John O’Grady, a San Francisco estate-planning lawyer. “Kids are in the lawyer’s office after the funeral, they’ve never run a business, never hired an accountant or a lawyer or a real-estate agent, and they’re still grieving. When you add the financial and legal issues involved, they get overwhelmed very easily.”

Uncomfortable as it may be, O’Grady says it’s better to have all of the discussions and, sometimes, fights while the business owner is still alive, particularly when a whole family is involved. “If everyone has their views heard, they’re more likely to buy in to the plan, even if the parents adopt some other plan,” he says. “It’s the kid who doesn’t know, or doesn’t want to know—who will wake up outraged one day about being left in the dark and go to court.”

As the price of real estate and stocks has risen over the past 30 years, there’s more for inheritors to fight over. Within many families, long-festering resentments often surface when decisions are being made about money and responsibilities, making the prospect of discussing your financial wishes that much easier to put off. “It’s one of the most sobering talks you can have, andone very few people do,” says Angleton, now chief executive of Miami-based Aegis FinServ, a financial services company.

In his case, with his mother and sister’s blessing, he decided to put his father’s business up for sale, with the help of a family friend. When it sold, he negotiated to keep all of the employees on board with their benefits intact, and even added in a bonus as thanks from his family as they exited.

PQ_Bequeathed.jpgHow can you decide? Here is some advice from the pros.

Do a self-analysis. Carl Doerksen, director of corporate development at Generational Equity, an mergers and acquisitions advisory firm in Dallas, says you should start by asking: Are you qualified to run the business? Even if you’re familiar with the field, do you have the skill set needed to oversee it? Most importantly, do you have the passion for the work? For someone thrust into the thick of a new venture, the responsibilities and risks of a business means your life will change dramatically.

Evaluate the business. What are the opportunities and challenges? Can you handle the risk? Is it profitable? Is there potential for growth? Does the business have enough income for you to pay yourself a salary?

Assess your team. If a business is left to you and other members of your family, can you work with them? If there’s a partner or an employee who shares in the inheritance, do you feel you can work together? (A favorite saying of O’Grady’s: “If you want to get to know someone, try owning a business with them.”)

Keep your emotions under control. “Whoever is in the lead needs to take command of their emotions and think with their head and not their heart,” says Angleton. “Sometimes you have to move very rapidly with these decisions and you need to think clearly.”

Think local. Does this business carry a lot of responsibility in its community? How would a sale affect the town and the employees? Is there a legacy that you strongly feel you need to uphold?

Put a value on it. What could the company command if it was put up for sale? Is that what you’d want to sell it for? Look at who’s left to manage the team if it’s not a one-man shop and ask: Can they take over in your absence? “That’s what buyers are looking at,” says Doerksen.

Ask an expert. Talk to an outside accountant, tax adviser or a business consultant—someone who isn’t a member of the family and doesn’t work for the business. “My father gave me the best advice when it came to this: Pay for the best in the business for consultants. Failure will cost you triple,” says Angleton. “You will be answering to the state, the IRS, Social Security, charities who had pledges made to them. You’ll go nuts trying to decipher it all and unwind it on your own.”

If this business isn’t your passion, you owe it to your new employees and the person you inherited it from to sell it, says Doerksen.

And when it’s all over…

Look to your own future. O’Grady tells his clients to start the conversation about bequeathing the business with their heirs now. Conflicts will inevitably arise, but be careful and develop a clear plan. “They can fight about it now, with the older generation’s input, or they can fight about it later, when many end up in court,” he says.

Ever since his experience handling his father’s business transition, Angleton says he keeps a close watch on estate-tax laws and revises his will periodically. He even records a version on video.

“Words mean different things, so I discuss everything in detail, like who to contact. Certain words can be translated otherwise by an outsider,” he says. “I wanted no mistakes at all.”

You Inherited a Small Business—Now What?

by Erin McDermott.

Jim Angleton Jr. started attending his father’s company meetings when he was 7 years old. He watched and learned as the venture-capital firm invested in dozens of small companies.

His dad died a few years ago. Though the two had what Angleton described as “very painful, heartfelt discussions” with an estate planner about what the father wanted for the future of his company after he died, crucial decisions needed to made shortly after he passed—and soon.

“There was a seven-figure portfolio, several employees, and about 30 days to decide what to do without my dad,” said Angleton, now 56. “I still miss him so badly.”

Anyone who’s been through the death of a close family member knows how emotionally difficult the days and weeks that follow can be. But when small-business owners die, there’s also a complicated web of issues for their survivors to navigate, especially for those designated to inherit their company.

It’s a gesture of profound trust for person to put the result of their life’s work in your hands once they’re gone. For the new proprietor, there are important immediate decisions to be made regarding banking, licensing, estate taxes, insurance, employees, and more. Eventually, the bottom line becomes clear: Do you want to give it a go—or should you sell?

Often, the answer can depend on how much planning has been done ahead of time.

Many small-business owners get so caught up in keeping their company afloat that they don’t take the time to think about planning for their inevitable exit, says John M. Masnica, an associate attorney at San Diego Law Firm and a business consultant at its reThink Consulting. He advises his clients to not leave it all up to their survivors, but to make these decisions before tragedy strikes.

And then there are the family issues.

“Parents often don’t talk about their plan, or not very thoroughly,” says John O’Grady, a San Francisco estate-planning lawyer. “Kids are in the lawyer’s office after the funeral, they’ve never run a business, never hired an accountant or a lawyer or a real-estate agent, and they’re still grieving. When you add the financial and legal issues involved, they get overwhelmed very easily.”

Uncomfortable as it may be, O’Grady says it’s better to have all of the discussions and, sometimes, fights while the business owner is still alive, particularly when a whole family is involved. “If everyone has their views heard, they’re more likely to buy in to the plan, even if the parents adopt some other plan,” he says. “It’s the kid who doesn’t know, or doesn’t want to know—who will wake up outraged one day about being left in the dark and go to court.”

As the price of real estate and stocks has risen over the past 30 years, there’s more for inheritors to fight over. Within many families, long-festering resentments often surface when decisions are being made about money and responsibilities, making the prospect of discussing your financial wishes that much easier to put off. “It’s one of the most sobering talks you can have, andone very few people do,” says Angleton, now chief executive of Miami-based Aegis FinServ, a financial services company.

In his case, with his mother and sister’s blessing, he decided to put his father’s business up for sale, with the help of a family friend. When it sold, he negotiated to keep all of the employees on board with their benefits intact, and even added in a bonus as thanks from his family as they exited.

PQ_Bequeathed.jpgHow can you decide? Here is some advice from the pros.

Do a self-analysis. Carl Doerksen, director of corporate development at Generational Equity, an mergers and acquisitions advisory firm in Dallas, says you should start by asking: Are you qualified to run the business? Even if you’re familiar with the field, do you have the skill set needed to oversee it? Most importantly, do you have the passion for the work? For someone thrust into the thick of a new venture, the responsibilities and risks of a business means your life will change dramatically.

Evaluate the business. What are the opportunities and challenges? Can you handle the risk? Is it profitable? Is there potential for growth? Does the business have enough income for you to pay yourself a salary?

Assess your team. If a business is left to you and other members of your family, can you work with them? If there’s a partner or an employee who shares in the inheritance, do you feel you can work together? (A favorite saying of O’Grady’s: “If you want to get to know someone, try owning a business with them.”)

Keep your emotions under control. “Whoever is in the lead needs to take command of their emotions and think with their head and not their heart,” says Angleton. “Sometimes you have to move very rapidly with these decisions and you need to think clearly.”

Think local. Does this business carry a lot of responsibility in its community? How would a sale affect the town and the employees? Is there a legacy that you strongly feel you need to uphold?

Why You Should Keep an Eye on Gen Y Entrepreneurs

Mark Zuckerberg. Dennis Crowley. Andrew Mason. These are just a few growing entrepreneurs, born between 1977 and 2000. In fact, the SBA and Junior Achievement Worldwide report that 69 percent of teenagers and two-thirds of college students say they want to start their own businesses.

So, what types of businesses are they starting? While many are starting businesses connected to social media or the web in some way (as Zuckerberg, Crowley and Mason did), there are some surprises. Some young entrepreneurs are reinventing old industries, like supply chains, credit unions and packaging. Some are creating businesses that cater to other Gen Y’ers. Others are joining family businesses, but turning them on their heads by hiring their parents and extended relatives as consultants and junior employees.

Why are Gen Y’ers so passionate about starting their own businesses? Research shows they may be more willing to take business risks than their Gen X and Baby Boomer predecessors. According to one study, 67 percent of Gen Y respondents were willing to take financial risks, even during the recession. They may be undeterred by competition, as they embrace a mindset where every other company is considered a potential collaborator. On the other hand, many members of Gen Y are starting their own business ventures out of necessity. In 2010, fewer than 25 percent of college graduates were able to get a job upon graduation.

Work life balance.pngOne thing seems to be constant: Gen Y entrepreneurs tend to play by their own rules. While they may share a desire for financial independence with their older counterparts, they could be motivated by other factors as well. They may be convinced that they can improve an existing industry or company with the technological innovations and brand ingenuity for which their generation is known. Or this social justice-minded generation might want to conceive of businesses that have initiatives for social good built into their business models. A study by Cone, Inc. and Amp Insights shows that 61 percent of 13- to 25-year-olds feel responsible for making a difference in the world, and 79 percent of them want to work for a company that feels the same way.

Or, maybe Gen Y just wants to have fun at work. Studies have shown that these entrepreneurs value and protect work/life balance more than any other group. In fact, 59 percent of respondents to a survey of 37,000 college graduates said that balancing their personal and professional lives was at the top of their list of career goals.

This generosity doesn’t only apply to their schedules. They are almost shockingly flexible with their employees. They have embraced telecommuting, job sharing, part-time employment, virtual offices and creative morale-boosting efforts to a degree that puts most of the companies on the “best places to work” lists to shame.

Whether you’re a member of Generation Y yourself, a more seasoned entrepreneur looking for a younger business partner, or a consumer, this is a generation to watch. Have you learned any lessons from a member of Gen Y? Or, are you a Gen Y entrepreneur?