Here”™s a sobering fact: 65 percent of family owned businesses nationally are expected to transfer ownership within the next five to seven years, and of those businesses, more than half are expected to fail shortly thereafter.
To help prepare for a successful changeover, the Hudson Valley Technology Development Center (HVTDC) is sponsoring a workshop titled Succeeding During Uncertain Times: Strategies for Family-Owned Business, as part of a an ongoing advisory program.
As the American economy revved up in the baby boom generation, many successful businesses were founded, said Jim Kehoe, a strategic business adviser with the nonprofit HVTDC. “That population of founders is now in their 60s and 70s and are looking to transition out of their business,” said Kehoe. “More than half those businesses will fail within a few years because they didn”™t plan it properly, didn”™t choose the right successor, or didn”™t put a strategic plan in place before the ownership transition.”
HVTDC is running a day-long workshop to provide insight into new ideas and fresh strategies that can promote a successful changeover. Workshops will be held March 25 at the Thayer Hotel at West Point and March 26 at Tappan Hill Mansion in Tarrytown. Each workshop includes breakfast and materials. The fee is $49 per workshop for owner/principal and $29 for each additional person in attendance.
Lise Stewart of the Galliard Group will present a discussion for successful exit and succession plans and HVTDC will provide opportunities for following up on what is learned.
“The reasons businesses fail in succession go on and on,” said Bob Winrow, also of HVTDC. “In many cases they are started by entrepreneurs and when they lose their energy, maybe those kids don”™t have the same skills at entrepreneurship.”
“Those businesses started by entrepreneurs had a great ride, but now it”™s a different game,” said Kehoe. “So maybe a strategy is to create an advisory board to help them make a little bit more-informed decision, provide assistance to guide the ownership in the pros and cons of whatever direction the business is going.”
A first step is to understand what the business is worth before successful succession planning can be undertaken.. “Most owners have an inflated view of the value of their business,” said Kehoe. “We have ways of going in and providing a realistic assessment of what it is worth.”
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And it is never too soon to start setting up ways to ensure the business continues. Winrow said that “an even more startling statistic” than the huge upcoming turnover and potential failure rate is that fewer than one in 20 of those businesses will make it to the third generation.
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“We want to be the helpers for small businesses,” said Winrow. “When you start taking about attorneys and financial planners, people”™s eyes roll and they see dollar signs. This is designed to be a cost effective ways of getting things done that will help people.”
Registrations are now being accepted, visit hvtdc.org or call Phyllis Levine at 896-6934 Ext 3001.
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Estate planning: a minefield in search of a guide
It”™s a given that you can”™t take it with you. Uncertainty kicks in surrounding how much a person can leave to spouses and heirs when they die.
Right now, an estate that exceeds the threshold is taxed at 45 percent. In December the House of Representative passed a measure that raises the exemption to $3.5 million in total assets, anything less than that is exempt from the estate tax. But the Senate has not acted and it is uncertain what the ramifications are if no action is taken, since originally, under a bill passed in 2001, that exemption amount was slated to resort back to $1 million in 2011, unless Congress intervenes.
This does not mean you should plan to check out before then. Rather, say experts, learn the intricacies of the law and arrange gifts and wills accordingly. For example, according to the website MoneyInstructor.com, a person”™s surviving spouse can inherit any sized estate tax free, as long as the inheritor is a United State”™s citizen and there is no third party interest benefitting from the estate.
Funeral expenses and administrative fees to probate an estate are all tax deductible. So, one strategy that may not be mainstream, but could be fun, would be to throw a New Orleans-style funeral while driving your estate under the threshold value, whatever it turns out to be.
A more mainstream approach would be to give some away, while you are still kicking. Most charitable donations are tax deductible.
If you are lucky enough to be in the realm of leaving more than a million dollars behind when you die, perhaps the best idea now is to invest a little of the funding on a good estate lawyer.
