Entrepreneur Andy Willoughby reviews New York Times article; How to Prepare Your Small Business for Succession
Posted By: Andy Willoughby
Here is a New York Times article I want to share written by Ian Mount on how to prepare your business for succession.
SMALL-BUSINESS GUIDE
How to Prepare Your Business for Succession
By IAN MOUNT
Published: March 17, 2010
WHEN his father died in 2006, Allen Frechter thought that his work as executor of the estate would be fairly straightforward.
But then he looked under the hood of his father’s firm, Plexi-Craft Quality Products, a manufacturer in New York City of acrylic furniture. Mr. Frechter’s father, George, had worked until the day before his death, at 86, and like many small-business owners, he had made no plans for what followed.
Purchase orders were still handwritten. There was no list of best customers or products. There was no data and no way to analyze the company’s performance. So Mr. Frechter, 49, wound down his own home-improvement firm in Boston and started commuting to New York to run Plexi-Craft. He moved it to a cheaper location and had an employee spend 250 hours entering six years’ worth of customer data.
Not only did the firm survive, but Mr. Frechter expects it to double its annual revenue to $5 million by 2012. But many are not so lucky. Business owners who do not form a succession plan create a time bomb that can not only destroy their companies but tear apart their families. “A lot of families fight and fight until the business is gone,” said Jim Clay, who heads the trusts and estates department at the law firm of Morrison Fenske & Sund in Minnetonka, Minn. “It eats up everyone’s inheritances.”
Here are some suggestions to avoid a succession disaster:
IDENTIFY YOUR SUCCESSORS Deciding which child or relative will sit in the corner office is often so emotional that it can stop succession planning before it starts. But it is the necessary first step. “You have to make an honest assessment of your children,” said Robert W. O’Hara, owner of O’Hara & Company, a financial planning firm in Chelmsford, Mass., that specializes in exit planning for entrepreneurs. “Don’t assume the next generation has the same skills.”
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