A Must-Read Article on Having Children Take Over the Family Business
If you’re like most business owners, you look forward to the day that you can hand over the keys to your children.
But there are some issues to consider, says Josh Patrick, the owner of a wealth management business, Stage 2 Planning Partners, that focuses on the strategic issues faced by the owners of private businesses. In a recent Divestopedia article, “Kids Take Over the Business? 8 Things to Consider,” Patrick examines what it takes to make a family business transition successful
1. Rules for Joining the Business.
Letting a child to take over a business right after finishing his or her education could be a huge mistake, Patrick says. After all, how can a parent be sure that a child can handle operating the business without some proven experience under his or her belt? Make sure your child pass the test any other employee would have to pass to join the company. Establish some rules for children to take over the business.
2. No Fake Jobs
Don’t create a job for your children. Senior decision-making roles should be earned and not handed out as a birthright. The end result of this approach could create a range of diverse problems.
3. Pay Should be Fair
Quite often when a child takes over a business, his or her pay is either far too high or far too low. Other employees will notice how your children are being treated. “Pay needs to be on your company scale,” Patrick says. “No more, no less.”
4. The Kids Must Grow the Business
Business growth must always be kept in mind. When having your children take over a business, it is essential that they have the ability to not just maintain the business but grow it as well. If they can’t handle the job then, as Patrick notes, you are not doing them any favors. Perhaps it is time to sell.
5. Stock Ownership
Only children involved in the business should own stock, Patrick recommends. Otherwise, some children will feel invested in the business and others will not and may way to cash out. This issue can become a significant problem once you, as the business owner, either retire or pass away.
6. Sell, Don’t Give Your Business Away
Patrick recommends that a business should only be sold to children and not given outright. A child who simply given a business hasn’t earned it and may not perceive its value. Additionally, if a child or children buy the business, estate planning becomes much more straightforward.
7. Let Go
Once you have sold their business to your child, “let go.” At some point, you will have to retire. Regardless of the outcome, you’ll ultimately have to step back and let your children take charge. It’ll be easier to let go if you transition into something else that interests you.
8. Your Kids Will Change Things.
Your children will change how things are done. This fact is simply unavoidable and should be embraced.
Working with an experienced business broker is a great way to ensure that selling a business to your child or children is a successful venture. The experience that a business broker can bring to this kind of business transfer is quite invaluable.
Copyright: Business Brokerage Press, Inc.
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Read MoreCredits, CPAs and Cannabis: Issues for Georgia Businesses
Three CPAs from Frazier & Deeter spoke at the May 28 Georgia Association of Business Brokers meeting about the emerging cannabis industry as well as other tax programs that affect both buyers and sellers of businesses.
Matthew Foster, CPA, Tax Partner at Frazier & Deeter and the firm’s National Practice Leader for the Cannabis Industry, discussed the emerging cannabis industry in Georgia, including tax issues and obstacles to financing. Andrew Moore, CPA, Senior Manager of the Tax Department at Frazier & Deeter, discussed film credits, low income housing credits, opportunity funds, and syndicated conservation easement transactions, all of which can lower the taxes due after the sale of a business. Jennifer Gruner, CPA, tax partner in Frazier & Deeter’s Real Estate Group, covered opportunity funds.
Linked here is a copy of their presentation. Credits CPAS Cannabis Presentation To GAAB_05252019
Hear an audio of their remarks.
The Georgia Association of Business Brokers meets at conference room hosted by the Georgia Association of Realtors at 6065 Barfield Road, Sandy Springs, GA, 30328. The monthly GABB meeting is free and open to the public and is preceded at 9:45 a.m. by a free light breakfast and networking session. The meeting will last from about 10:30 to somewhere between 11:30 and noon. Please fill out the form below if you are not a GABB member but wish to attend our meeting.
While Andrew specializes in working with small and middle market companies and their related owners, his background allows him to serve a broad client base from smaller “mom & pop” type establishments to much larger corporate conglomerates. He has extensive experience helping clients recognize and implement tax saving opportunities and prides himself on recognizing opportunities often missed by others. Prior to joining Frazier & Deeter, Andrew led major initiatives that include helping clients implement the IRS Tangible Property Regulations and filing related accounting method changes which resulted in his clients saving millions of dollars in taxes.
At Frazier and Detter, Andrew is an active member on the pass-through team and participates in the overall delivery of tax compliance, consulting and planning services offered by the firm.
Before joining Frazier & Deeter, Andrew spent just over nine years working with clients in the automotive, manufacturing & distribution, trucking, legal, technology and service based industries at various other accounting firms in Atlanta.
Matthew Foster is a Partner in the Atlanta and Las Vegas office tax practices and serves as the firm’s National Practice Leader for the Cannabis Industry. He has over a decade of experience in public accounting, with the majority spent practicing at Frazier & Deeter, LLC.
Matthew’s primary areas of focus are middle market companies that are privately owned or backed by private equity. His tax expertise in this area has allowed him to help his clients with various opportunities, such as corporate structuring for tax strategies, mergers and acquisitions, joint ventures and ESOPs. His clients operate in a variety of industries including, but not limited to, manufacturing, distribution, technology, real estate and construction.
Jennifer Gruner has more than 11 years of public accounting experience, which includes five years with Ernst & Young’s real estate tax compliance department. Jennifer has a wealth of experience with tax compliance for small to large national real estate developers, builders, investors in commercial estate and the individual partners of those firms. In addition, she has signification experience with various types of investors of real estate deals, including foreign and domestic individuals, syndicators, foreign and domestic funds, including tax exempt investors and REITs.
Jennifer has extensive knowledge of limited partnerships, limited liability companies and family partnerships with multi-tier structures operating or investing in various states. She also has experience with complex partnership allocations and waterfalls, technical terminations, sale of assets, depreciation and federal and state withholding for foreign and domestic investors.
The GABB is the state’s largest and oldest association of professionals who specialize in brokering the purchase and sale of businesses and franchises. Broker members help owners determine the asking price of their business, create marketing plans and strategies for selling their business, identify and qualify buyers, and have the knowledge, experience and skills needed to help maintain the confidential nature of the process. The professionals of GABB relentlessly pursue professional development so they can provide superior, ethical services for all customers and clients. Affiliate members include bankers, lawyers, appraisers, insurers and other professionals like Mr. Moore who work closely with brokers to help owners and buyers get to the closing table.
For more information about GABB, please contact GABB President Dean Burnette at 912-247-3209 or dean@b3brokers.com, or GABB Executive Director Diane Loupe at diane@gabb.org or 404-374-3990.
Read MoreMiddle Georgia Businesses Expect Strong Year
Businesses in Middle Georgia experienced a very positive 2018 and expect an even better 2019, according to the results of Mercer University’s 2018 Middle Georgia Economic Outlook Survey.
During 2018, businesses in Middle Georgia added more employees than they expected to add at the beginning of the year. Businesses were also very optimistic about adding employees during 2019.
Interestingly, businesses show strong optimism about adding employees despite believing that average employee compensation was higher during 2018 than expected at the beginning of the year, and that this average will further increase in 2019.
The BB&T Center for Undergraduate Research in Public Policy and Capitalism and partner chambers received responses to their electronic survey from 125 individuals. Dr. Antonio Saravia, associate professor of economics and director of the BB&T Center, compiled the results, which can be viewed online.
“In general terms, businesses in Middle Georgia seemed to have experienced a very strong 2018 and expect an even stronger 2019,” said Dr. Saravia. “The indices for net earnings, sales and hiring were all up for 2018 and are predicted to continue to increase in 2019, which is very good news. The report shows absolutely no recessionary concerns. While companies in Middle Georgia still struggle finding the right talent in the area, the economic sentiment continues to be positive as the economy continues to expand.”
The most significant obstacles to business identified by the respondents for both 2018 and 2019, as evidenced by intensity indices, were the quality of labor, the cost of labor, government regulations and/or red tape and taxes.
Respondents represented considerable variety in terms of company size, geography and industry. Most were small businesses under 10 employees, which accounted for 48 percent of the total number of respondents. The majority had principal offices located in Bibb (49 percent), Houston (29 percent) and Monroe (11 percent) counties. Respondents represented a wide range of industries, led by retail trade (14 percent) and professional and technical service (14 percent).
The survey, released in March 2019, was conducted by the BB&T Center for Undergraduate Research in Public Policy and Capitalism in Mercer’s Eugene W. Stetson School of Business and Economics, in partnership with the Greater Macon Chamber of Commerce, the Robins Regional Chamber of Commerce, the Forsyth-Monroe County Chamber of Commerce, the Milledgeville-Baldwin Chamber of Commerce, the Jones County/Gray Chamber of Commerce, the Roberta-Crawford County Chamber of Commerce and the Wilkinson County Chamber of Commerce.
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Embracing Technology to Boost Your Business
Technology can help business owners get top dollar when selling their business, according to Keith Gregg, Chairman/CEO of Chalice Wealth Partners, a San Diego-based wealth tech member organization for independent wealth advisors.
Gregg, in February 8, 2019 article in Forbes, “Using Tech to Enhance and Sell a Business,” says some small business owners limit their search for a potential buyer to their professional network or rely on an appraisal service to determine what their business is worth. He writes that the right technology can help avoid these pitfalls. He explains how important it is to address three important areas before placing your business on the market.
Upgrading Systems
Before looking for a buyer, Gregg recommends upgrading aging software and hardware. Upgrading systems can be particularly important for attracting younger buyers. It is common for businesses to be successful without proprietary technology or procedures, but that doesn’t mean that technology should be ignored.
Important information should be digitized, as this data will be vital for the new owner to grow the business over the long haul. Incorporating software that can track and analyze data across the business is likewise valuable. Using software, such as customer relationship management and financial management software, will showcase that your business has been modernized.
Business Valuations
Determining the value of your business can be tricky and laborious. Gregg recommends opting for a professional business valuation, as he feels, “business valuation calculations can remove much of the guesswork from the process.”
You should expect a business valuation calculator to include everything from verified data on comparable business deals, including gross income and cash flow figures and more. There are even industry-specific calculations that can be used as well. The main point that Gregg wants to convey is that business owners should use tangible and proven data to sell their businesses. Like upgrading systems appeals to younger buyers, the same holds true for using verified data to sell.
Take Advantage of the Digital Marketplace
Gregg’s view is that perhaps the single greatest technology for business owners to leverage is that of the digital marketplace. Sites that link businesses with prospective buyers can help to streamline and expedite the sales process. Through such sites, it is possible to go deeper than a specific industry and even explore sub-sectors, thus enhancing the chances of finding the right buyer.
Technology can be used to help sell businesses in a variety of ways. An experienced and proven business broker will leverage a whole range of tools to assist business owners when selling their businesses. When you opt for a proven business broker, you can expect to receive offers from serious and vetted buyers and, in the process, save a great deal of time while maintaining confidentiality.
Copyright: Business Brokerage Press, Inc.
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Read MoreThinking About Succession Planning
If you own a small business and haven’t thought about succession planning, you should. Brad Cherniak Co-Founder and Partner of Sapient Capital Partners, a Toronto-based advisory firm, examined the importance of succession planning in a February 20, 2019 Divestopia article, “All Companies Need to Look at Succession Planning.” Owning and/or operating a business can be a great deal of work, but it is imperative to take the time to develop a succession plan.
Succession Planning is for Businesses of All Sizes
Cherniak says that every business owner to realize that succession planning isn’t just for big businesses. But the majority of small-to-medium sized businesses, as well as their senior managers, simply don’t focus much on succession planning at all.
Many business owners see succession planning as essentially being the same as exiting a business. Cherniak is quick to point out that while the two can be linked and may, in fact, overlap, they are by no means the same thing. They should not be treated as such.
“Succession planning comes down to this: Are more general, innate skills critical to the leadership of your company, or are more situation-specific skills?” Cherniak asks.
Following an Arc Pattern
Importantly, Cherniak notes, “Succession planning should also be linked to your strategic planning.” He feels that both entrepreneurs and businesses managers follow an arc pattern where their “creativity, energy and effectiveness” are all concerned. As circumstances change, entrepreneurs and business managers can become exhausted and even a liability.
The arc can also change due to a company’s changing circumstances. All of these factors point to “coordinating the arcs of business,” which includes “startup, ramp-up, growth, consolidation, renewed growth and maturity,” with whomever is running the business at the time. In this way, succession planning is not one-dimensional. Instead it should be viewed as quite a dynamic process.
Evaluating Each Company Individually
Cherniak highlights the importance of making sure that the team matches the needs of a company as well as its stages of development. Who is running a company and setting its direction? Answering these questions is important. It also is of paramount importance to make sure that the right person is in charge at the optimal time.
Companies and their circumstances can change. This change can often occur without much notice. As Cherniak points out, few small-to-medium sized businesses focus on succession planning, and this is potentially to their detriment.
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