GREED AND PRIDE are the main enemies of a successful family-run business, according to Russell and Roger Allred, Allred and Associates.
"Success must precede succession," said Roger Allred. "If your business has not achieved success, there's no reason to plan for succession because no one wants to take over a failing business."
The Allreds discussed planning from success to succession using "power tools." The Allred's "power tools" for family businesses include four plans: family, strategic, succession, estate.
The family plan entails living life in a manner that you are proud of and running your business with the same values, Russell Allred said. You need to have a destination before you start making decisions, begin with the end in mind.
"Recognizing that your business is integrated with your family is a necessary step toward success. Family businesses must make a plan that incorporates family values. "Write down the values that the family stands for."
Business owners need to demonstrate love toward family members regardless of feelings. Next, they must optimize the individual. Optimizing the individual means letting family members have the freedom to do what they want.
"We do not have children to fill personnel positions in the business," Allred said. "The business is meant to bless the family not vice versa."
Family business owners must value integrity and family more than money.
"Children need to be paid for what they do, not for who they are," Allred said. "Pay them appropriate to the contribution that they make to your business."
Lastly, members of family-run businesses need to enjoy working with their family members. "Find time in your family business to show your relatives that you're having fun," Allred said.
Strategic Planning The strategic plan sets objectives for what the business is trying to achieve.
"The plan will allow you to evaluate what is important as you do your strategic planning," Allred said. "Strategic plans should help you concentrate on what makes money."
The succession plan calls for achieving a level of prosperity so that the business can have succession. Roger Allred suggested mentoring for succession.
"Mentoring involves bringing in an experienced person to help upcoming family members with running the business until they are ready to take over," Allred said.
Retiring in place is another option for succession that the Allreds have experienced.
"This rarely works when the retiree still wants to control every facet of the business," Allred said. "If the retiree simply wants to help with decisions when they are needed, retiring in place will work."
Other options include hiring a business manager, selling the business to the highest bidder, or taking the company public.
"Taking the company public is a very technical operation," Allred said. "You've got to be large enough to employ the attorneys, accountants, and all the oth ers that are involved in taking a company public."
Employee Stock Ownership Plans are another option. Under these plans, the employees own a percentage of the business. The business can benefit from tax advantages when it allocates stock for the employees to purchase, Allred said.
Successful business owners take care of their health. "If you are the best at what you do and you die, you aren't doing anyone any good," Allred said. "You need to be healthy and strong so that you can take care of your responsibilities."
Staying Healthy He listed the things that business owners must be doing to make sure that they are helping the company:
Develop meaningful relationships with your family.
Give something to mankind such as donating blood, teaching a Sunday school class, or being a scoutmaster.
Play regularly and hard.
Get enough rest.
Eat well or supplement your diet for proper nutrition.
Exercise at least three times per week.
Thank God everyday for your life and draw closer to him.
Learn something new everyday so that your intellect is continuously stimulated.
Don't use recreational drugs.
Make a personal commitment that each new day will be fantastic.
Family members must be trained to take over the business before the owner's death, according to Allred.
"If you allow your children to sweep the floor, then when you die, a janitor will be running your company," Allred said.
Family businesses can provide opportunities for all members of the family. Children must be started young and must be educated.
"Kids need to study something related to the business so that when they come into the business they can be useful and productive."
Allred recommended that senior family members have children work outside the family business for a competitor or someone in a related business.
"This teaches them that Dad's way isn't the only way and gives them a sense of satisfaction," Allred said. "It also brings in fresh ideas."
Estate Planning The estate plan requires family businesses to use attorneys and CPAs.
"Use an attorney and CPA who specializes in estate planning," Allred said. "If you don't plan properly, the estate will not transfer to your loved ones. It will go to the IRS."
Allred quoted statistics from a large CPA firm stating that only 30% of successful family businesses make it to the second generation. The same study said that one-third of all business owners in the United States are more than 61 years old.
"In the next 10 to 15 years, 10 trillion dollars of family business value is going to pass to the next generation," Allred said. "Ninety-two percent of these businesses owners plan to keep the business in the family."
The Allreds state that family businesses must seek and heed professional advice.