business decisions dave goeller [email protected]
TRANSCRIPT
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KEY QUESTION• Is it time to start planning
for the future of your business?
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Business Life-CycleIntroduction Growth Maturity Decline
Business
Phase
Strategic
Effort
Penetrate & Grow
Protect & Defend
New Opportunities
Divest
Time
Source: Wadsworth
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Business Decisions•Business Operations Continue
•Business Operations End
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Business Owner
Estate Plan
Business Succession Plan
Income Management Retirement
BUSINESSSUCCESSOR HEIRS
Owner’s priorityContinuation of family ownership assets
Owner’s priorityContinuation of the business
Estate Plan
Retirement Plan
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KEY QUESTION• Do you want your business
to continue beyond your life and be operated by the next generation?
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Business Life-CycleIntroduction Growth Maturity Decline
Business
Phase
Strategic
Effort
Penetrate & Grow
Protect & Defend
New Opportunities
Divest
Time
Source: Wadsworth
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Business Life-Cycle
Introduction
Growth
Maturity
Decline
Time
Source: Wadsworth
Introduction
Growth
Maturity
Decline
Time
1st Generation 2nd Generation
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Business Life-Cycle
Introduction
Growth
MaturityDecline
Time
Source: Wadsworth
Introduction
Growth
Maturity
Decline
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The Importance of Planning
• We are living and working longer• Technology• Increased Volatility & Uncertainty• Expectations• Coordinate Income Transfer, Management
Transfer, Retirement and Estate Plan
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KEY QUESTIONS• Do you want only Business
Asset Ownership to continue? OR
• Do you want a Viable Ongoing Business to continue?
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KEY QUESTIONS
•Do you want to have a Successor?
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The Need for Planning
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Business Owner
Estate Plan
Business Succession Plan
Income Management Retirement
BUSINESSSUCCESSOR HEIRS
Owner’s priorityContinuation of family ownership assets
Owner’s priorityContinuation of the business
Estate Plan
Retirement Plan
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Business Succession PlanProcess
• Income/profit Transfer Plan• Management Transfer Plan• Retirement Plan• Estate Plan (Asset Transfer Plan)
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Income and Profit
– Financials– How much?– Sources?– Wage– Incentive– Enterprises– Retirement Income?– Start own business
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Income Transfer Models
• Spin-Off Arrangement
• Multi-Person Arrangement
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SPIN-OFF APPROACH
Business Business
C
C
C
P
P
Business
P
Business
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MULTI-PERSON APPROACHP C
Business
P & C
Business
P
Business
C
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Management TransferPlan
• Three most important factors to a successful business:–Management
•Management
–Management
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Management Transfer Plan
• Decision making Authority (Very Difficult)
• Accountability• Risk—Reward• Coach/mentor/teacher • Retirement???
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Business Succession Plan Management Transfer Period
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Business Succession Plan Management Transfer Period
ownersuccessor
time
Short Transfer PeriodShort Transfer Period
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Business Succession Plan Management Transfer Period
Long Transfer PeriodLong Transfer Period
owner
successor
time
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Management TransferPlan
• Phased plan approach–#1 Owner make decisions (Mentor)–#2 Owner and successor make
decisions together–#3 Successor make decisions
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Management TransferPlan
• Involves the Timing of Decision Making Authority for the Business
• Involves the Timing and Acquisition of important Intangible Relationships
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Retirement Planning For Succession
– Day to day labor & management –Fully retire–Semi-retire–Gradually retire–Abruptly retire
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Retirement Plan• IF?
• When?
• Where will you live
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Retirement Plan• What will you do?
• Financial Needs?
• Source of Funding?
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Retirement Plan• Financial Needs?
–$10,000/year–$50,000/year–$200,000/year
• Source of Funding?
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Retirement Plan• Source of Funding?
–Social Security?–Pension or 401k?–Rental Income?–Sale of Assets?
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Key Concepts
Family BusinessesVS
Nonfamily Businesses
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Key Concepts
− A Critical Difference: − Family Business vs Non-family Business
− The priorities, expectations, relationships, and measures of success in a family are, and should, be different than the priorities, expectations, relationships and measures of success in a business.
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Key Concepts
Family Businesses−Parent Child Role
−Business Partner Role
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Key Concepts
Family Businesses−Family time
−Work time
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Key Concepts
−Family Businesses−Communication
−Extremely Important−Differentiate roles−Business Meetings
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Successful Business TransitionsCommunication
• Expectations, Expectations, Expectations• Regular business meeting throughout
transition period• Talk about it, then write it down• Share with non-farm family members?• Surprises cause problems
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Job Description
• If you where to write a job description for the successor of your business what would it say regarding:– Starting and ending time each day?– Breaks and lunch?– Job responsibilities?– Pay?– Benefits?– Vacation?– Advancement opportunities? When?– Evaluation Criteria?
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Business Succession Plan The Transfer Stages
Testing
Commitment
Established
Withdrawal
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Timeline
–How long in each for Stage?• Testing? • Commitment?• Established?• Withdrawal?
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Business Succession Plan The Transfer Process
LABORLABOR
INCOMEINCOME
MANAGEMENTMANAGEMENT
ASSETSASSETS
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Business Components–LABOR..the physical work involved
–INCOME..minus expenses equals profit
–MANAGEMENT..decision making authority
–ASSETS..what you own, rent or control and the liabilities associated with them
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Business Succession PlanTestin
gCommitment Established Withdrawal
Timeline When & How Long
LaborDuties-job description
Income/profitAmount-source-method
ManagementAuthority-accountability-decision making
AssetsWho owns/controls
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Labor
–Job description • Owner• Successor
–Expectations
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Income and Profit
– How much?– Sources?– Financials
• Balance Sheet• Income Statement• Trend and ratio analysis• Cash Flow projections
– Retirement Income?
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Successful Farm TransitionsManagement Transition Plan
• How will management be split?– Enterprise– Whole farm– Farm activity (marketing)
• Timeline for management transition– Learning or testing phase– Completion date
• Parent/child relationship vs. business partner
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Assets
–Which assets• When
– Basis consideration
• How– Sale– Gift– Inherit
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Barriers to Business Succession
• Communication• Retirement Plan• Capital (Fair vs Equal)• Communication
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Resources• John Baker, Attorney at Law
– Iowa State University– Director of the Iowa Beginning Farmer Center– 800 447 1985
• Joe M. Hawbaker, Hawbaker Law Office– Phone: 402-558-3540– Email: [email protected]
• Roger A. McEowen, Attorney at Law– Iowa State University– Associate Professor of Agricultural Law– Phone: 515 294 4076
• Dave Goeller– University of Nebraska– Deputy Director NCRMEC– 402 472 0661
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Estate Planning Questions
• What?• Who?• How?• When?
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Estate Planning Questions
• What?–What do you own?–What is the value?
• Who?–Who do you want to give it to?
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Estate Planning Questions
• How?–Will, Trust, Title, POD,
Beneficiaries • When?
–Time of death transfer?–While you’re alive (Gift)?
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Estate Planning Questions
• When?–Time of death transfer?–While you’re alive (Gift)
• How?–Will, Trust, Title, POD,
Beneficiaries
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Estate Plan• Concepts
–Fair vs Equal
–Contribution = Compensation
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Contribution = Compensation?
• 1990 Networth = $90,000/3 kids = $30,000• 2012 Networth= $390,000/3kids=$130,000• Contribution/Compensation • 50%/50% Partner and Founder• $300,000 Partner & Founder $150,000 ea• Partner’s share
– $ 30,000 from 1990– $150,000 from growth and appreciation– $ 50,000 from Founder growth and appreciation– $230,000 total for Partner $80,000 each for siblings
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Time Management Matrix
I. Activities
Crisis Management
Deadline Projects
II. Activities
Planning
Relationship Building
III. Activities
Some Calls, Mail,
Popular Activities
IV. Activities
Time Wasters
Busy Work
Urgent Not Urgent
No
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