Join the Minority!

A Force to be reckoned with…

Family owned businesses comprise 35% of the Fortune 500 and contribute 64% to GDP, 68% of employment and 78% of new jobs. Estimates are that 80-90% of businesses in the United States are family owned. And 90% of family owned enterprises control more than on business and 54% plan to start a new entrepreneurial endeavor. All of these statistics are from the Family Business Institute’s research.

Family firms are female friendly as well as 24% are led by a female CEO and 60% have women in management positions. This compares to the Fortune 1000 companies which only have 2.5% led by women according to Fortune Magazine 2007.

The mean age of the family business controller is 60.2 years old. And while 40.3% of those entrepreneurs want to retire in 2017, less than half of them have chosen a successor. Only one-fifth have no estate plan despite the majority stating that they are aware of the estate tax impact on their business and family.

For the next generation, one-third say they have no knowledge of senior generation’s transfer plans and get no updates on ownership.

Plan for success…

The statistics on longevity are quite sobering. According to Family Firm Institute and PWC’s annual family business surveys, only 30% of businesses survive into the second generation. Twelve percent make it to the third generation and just three percent make it to the fourth generation and beyond.

While 88% of family business owners surveyed expect their firm to be viable in the next five years, many are hesitant to take the steps to make sure that the business survives them. Ira Kalb, Professor of Marketing at the Marshall School of Business at the University of California says that too many founders micro manage the business and fail to delegate or promote leaders so that they can step away.

There are numerous reasons for this failure to plan. All too often, the CEO loves running the business and is afraid if he or she steps away and retires, they are facing the end of their life. No one wishes to face mortality yet two things in life are certain: death and taxes!

In attempting to create a succession plan entrepreneurs often make technical mistakes as they fail to seek out outside counsel and advice. All too often, they plan in a vacuum not recognizing changing markets and tax impacts. Too many make the mistake of leaving the business to the surviving spouse who may not ever actually worked in the business. The big elephant in the room is how to treat all the children and other heirs equitably.

Creating a legacy…

While each family has specific issues and challenges unique to their family and business, the process to create a legacy and increase the odds for success in transferring ownership to the next generation is similar. One must start with a vision of what both the current generation and upcoming generation have for their family business.

After vetting out the vision, governance is the next critical step. Creating a short and long term strategy for ownership, roles of family members, any outside shareholders, and how to treat family members who choose not to work in the business are critical pieces to the governance criteria.

Bringing in outside advisors helps orchestrate the process. An outside advisor can help lead meetings, set agendas, open discussion points, inform the family of both income and estate tax consequences and help keep the plan in motion to completion.

So make it a goal to tackle this issue to help your family be in the minority of those businesses with a formal succession plan!

About Chapin Hill Advisors, Inc.

Kathy Boyle founded Chapin Hill Advisors in 2000 after spending her early career working in large and small investment firms on Wall Street. Chapin Hill Advisors works with privately-held businesses, often family-owned, to help them execute financial, estate and succession planning. We work with the business owner to be sure their business will provide their family with the financial security needed , identify areas of risk and help create strategies to mitigate risk.

Businesses often need assistance creating strategies to allow the business to succeed the owner as well as address structure, systems and procedures. As a business grows, the owner needs to have a plan in place to allow succession, whether an outright sale or a transition to family, partners or employees.

We work with businesses of all sizes to assist them in creating strategies to increase revenue and profitability and tie the future growth to the owner’s or families’ personal financial goals. With larger businesses, we offer a resource directory of trusted professionals. Small businesses or solo-entrepreneurs can benefit from Chapin Hill’s combination business and personal planning strategies.

As a fellow entrepreneur, Kathy speaks from experience. She has tested many strategies in the trenches and seen her clients make mistakes as well as successes. Kathy helps entrepreneurs implement strategies for future success and helps to coach them to execute action steps.

She has advised business clients of all types and sizes on structuring sales of their businesses as well. Without a long term plan and a team who can replace the founder’s talents, a business is less likely to be purchased. Kathy’s background on Wall Street and in financial planning allows Chapin Hill to implement strong financial controls and combine both estate planning as well as business planning for future success.

For more information or a complimentary meeting, feel free to contact Kathy Boyle at: kboyle@chapinhill.com or 212-583-1992.

2018-06-15T17:13:25+00:00

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