****************** chapter 2 family-owned businesses copyright © 2009 by the mcgraw-hill companies,...
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****************** McGraw-Hill/Irwin Family & Business Written Mission Statement Include Children In Decisions Family DiscussionsTRANSCRIPT
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Chapter 2Chapter 2
Family-Owned Family-Owned BusinessesBusinesses
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
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Family-Owned BusinessFamily-Owned Business
Organizing/Operating Family-Organizing/Operating Family-Owned BusinessOwned BusinessFamily Relationships & Family Relationships & BusinessBusinessPreparing For The Next Preparing For The Next Generation & Management Generation & Management SuccessionSuccessionTax/Estate PlanningTax/Estate Planning
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2 - 3McGraw-Hill/Irwin
Family & BusinessFamily & BusinessWritten Mission Written Mission
StatementStatement
Include Children Include Children In Decisions In Decisions
Family DiscussionsFamily Discussions
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Family Mission StatementFamily Mission StatementStart From Trust/OpennessStart From Trust/OpennessUnanimous Agreement On Unanimous Agreement On
Values & VisionValues & VisionCopies To AllCopies To AllAvoid:Avoid:
Rushing FamilyRushing FamilyFavoring An AgendaFavoring An AgendaForgetting PurposeForgetting Purpose Photodisc
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Trends In Family BusinessTrends In Family BusinessKids Start Business & Get Kids Start Business & Get
Capital From ParentsCapital From ParentsParent Given Executive Parent Given Executive
PositionPositionSpouses Working Spouses Working
Together- Service Together- Service Businesses With TechnologyBusinesses With Technology
Needs Clear Chain Of Needs Clear Chain Of CommandCommand
Royalty-Free/CORBIS
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Tips ForTips ForSpousal OwnershipSpousal Ownership
Monica Lau/Getty Images
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Daughters ConsideringDaughters ConsideringSuccession To Family BusinessSuccession To Family Business♀Express Express
InterestInterest
♀Outside Outside ExperienceExperience
♀Learn From Learn From SeniorsSeniors
♀Be SensitiveBe Sensitive
♀Get InvolvedGet Involved
♀Meet WomenMeet Women
♀Define Define YourselfYourself
♀Develop A Develop A VisionVision
Royalty-Free/CORBIS
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SuccessfulSuccessfulFamily InteractionFamily Interaction
Founder = HeadFounder = HeadSome Family In High Some Family In High
PositionsPositionsInstill “Sense Of Instill “Sense Of
Ownership”Ownership”Deal With IncompetentsDeal With IncompetentsCompensateCompensateRecognize LimitationsRecognize Limitations
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Steps In DivorceSteps In Divorce1.1.Business AppraisalBusiness Appraisal
2.2.Negotiate BuyoutNegotiate Buyout
3.3.Decide What To Do Decide What To Do With Stock With Stock
4.4.Seek Tax ProfessionalsSeek Tax Professionals
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Family Culture & BusinessFamily Culture & BusinessLarge FamiliesLarge Families
oStay-At-Home MomStay-At-Home MomoDevelop Hobbies As Develop Hobbies As
Business BusinessWorking Moms Establish Working Moms Establish
BusinessBusinessoEconomy More DifficultEconomy More DifficultoNeed Additional IncomeNeed Additional IncomeoLarge Business No Longer Large Business No Longer
Family-FriendlyFamily-Friendly
Keith Brofsky/Getty Images
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Family ResourcesFamily Resources Borrow CapitalBorrow Capital
Sell StockSell Stock
Selling Personal Selling Personal AssetsAssets
OtherOtherPhotoLink/Getty Images
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NextNextGeneration PreparationGeneration Preparation
Start Part/Full-Start Part/Full-Time JobTime Job
Start Entry or Start Entry or Higher-Level In Higher-Level In BusinessBusiness
Outside Outside ExperienceExperience
Rotate JobsRotate Jobs
Earn Earn PromotionsPromotions
Teaching & Teaching & TrainingTraining
Leave Work At Leave Work At WorkWork
If Prepared, If Prepared, Give Give ResponsibilityResponsibility
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Succession PlanningSuccession PlanningPlan Early & Plan Early &
CarefullyCarefully
Groom SuccessorGroom SuccessorDoug Menuez/Getty Images
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Succession ProblemsSuccession ProblemsTreat Treat AllAll Children Fairly Children FairlyNonfamily Employees?Nonfamily Employees?Family Concerns:Family Concerns:
oCommunicationCommunicationoConflictConflictoEstate TaxesEstate Taxes
More Than 1 Child More Than 1 Child SuccessionSuccession
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SuccessionSuccessionObstacles: FounderObstacles: Founder
Financial SecurityFinancial SecuritySudden Free TimeSudden Free TimeSelf-EsteemSelf-EsteemFounder Fair To Founder Fair To
Successor(s)Successor(s)Successor Ready?Successor Ready?Jealousy/ Rivalry Jealousy/ Rivalry
To SuccessorTo SuccessorEffect On SpouseEffect On Spouse
Founder’s Founder’s Fiduciary Fiduciary Responsibility To Responsibility To Nonfamily Nonfamily EmployeesEmployees
Friends Continue Friends Continue To WorkTo Work
Fear Of DeathFear Of DeathReluctance To Reluctance To
Release PowerRelease PowerCoaching Skills?Coaching Skills?
Source: Family Business Experts, www.familybusinessexperts.com
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Spouse’s Role In Spouse’s Role In BusinessBusiness
Reluctance To Discuss Reluctance To Discuss Future Beyond Parents’ Future Beyond Parents’ Life Life
Fairness vs. FavoritismFairness vs. FavoritismFear Of Parents’ DeathFear Of Parents’ Death
SuccessionSuccessionObstacles: FamilyObstacles: Family
Source: Family Business Experts, www.familybusinessexperts.com
Jack Hollingsworth/Getty Images
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Personal Relationship Personal Relationship With FounderWith Founder
Differentiating Amongst Differentiating Amongst Key Managers Key Managers
Reluctance To Establish Reluctance To Establish Formal ControlsFormal Controls
Fear Of ChangeFear Of Change
SuccessionSuccessionObstacles: EmployeesObstacles: Employees
Source: Family Business Experts, www.familybusinessexperts.com
Royalty-Free/CORBIS
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Customers & SuppliersCustomers & Suppliers
Dependence On Dependence On FounderFounder
Trust/Confidence In Trust/Confidence In Potential Successor Potential Successor
SuccessionSuccessionObstacles: OutsidersObstacles: Outsiders
Source: Family Business Experts, www.familybusinessexperts.com
Royalty-Free/CORBIS
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Causes OfCauses OfSuccession Family Leader:Succession Family Leader:Sudden DepartureSudden Departure
oDiesDiesoBecomes IncapacitatedBecomes Incapacitated
Planned DeparturePlanned DepartureoLeaves CompanyLeaves CompanyoRetiresRetires
Royalty-Free/CORBIS/
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Family Leader:Family Leader:Replacement OptionsReplacement Options
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Selling To FamilySelling To FamilyMembers- Advantages Members- Advantages Stays In FamilyStays In FamilySource Of Family Source Of Family
EmploymentEmploymentStature MaintainedStature MaintainedOwner = RelaxOwner = RelaxPleasure Of SuccessPleasure Of SuccessStrengthen FamilyStrengthen Family
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Assured IncomeAssured IncomeLack Of WorryLack Of WorryConsult?Consult?Release TensionRelease TensionRelief Of ResponsibilityRelief Of Responsibility
Selling ToSelling ToOutsiders- Advantages Outsiders- Advantages
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Loss Of Family IDLoss Of Family ID
Loss = SadnessLoss = Sadness
Selling ToSelling ToOutsiders- Disadvantages Outsiders- Disadvantages
Greg Kuchik/Getty Images
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Ease TheEase TheTransition For OwnerTransition For Owner
Broaden FocusBroaden FocusDevote Time To:Devote Time To:
oHobbiesHobbies
oOther GroupsOther Groups
Gradually Turn Over Gradually Turn Over ControlControl
Doug Menuez/Getty Images
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Inc. 500Inc. 500CEOs’ Net WorthCEOs’ Net Worth
0%
10%
20%
30%
40%
50%
60%
<$1Million
$1-5Million
$5-10Million
$10-25Million
$25Million+
Source: Inc. Magazine, “Compensation”, November 2004.
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INC. 500 CEOs’INC. 500 CEOs’ Take-Home PayTake-Home Pay
0% 5% 10% 15% 20% 25% 30% 35% 40%
<$100,000
$100-250 K
$250-500 K
$500-750 K
$750-1 M
$1-3 M
$3 M+
Source: Inc. Magazine, “Compensation”, November 2004.
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Financial PlanningFinancial PlanningTax - Annual Conferences With Tax - Annual Conferences With
Tax AccountantTax AccountantEstate – Transfer Of Assets At Estate – Transfer Of Assets At
DeathDeathoPerpetuationPerpetuationoLiquidityLiquidity
Business StandpointBusiness StandpointoReduce Cash StrainReduce Cash StrainoMaintain Beneficiaries’ InterestMaintain Beneficiaries’ InterestoSmooth TransitionSmooth Transition
Keith Brofsky/Getty Images
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Estate Planning TechniquesEstate Planning TechniquesGiftsGiftsStock SalesStock SalesLiving TrustsLiving TrustsFamily Limited PartnershipsFamily Limited Partnerships
oMinimize CostMinimize CostoRetain ControlRetain Control
Buy/Sell AgreementBuy/Sell AgreementPhotoLink/Getty Images
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Business ValuationBusiness ValuationComparablesComparables
Earnings Earnings CapitalizationCapitalization
Book ValueBook Value