Search Results for: succession

Failure to Plan for Business Succession Equals Failure to Succeed

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You’ve spent most of your career building your business to be your legacy. You’ve reached a pinnacle, feeling secure in the knowledge that you’ve laid the cornerstone for future success.

So how can you ensure that legacy stays intact? Succession planning.

For many business owners, succession planning can be an uncomfortable topic to engage in, because it’s often associated with mortality or worse, loss of control.

Our advice? Put aside the discomfort and make a plan. That way, you have time to consider possible successors and invest in either training or hiring to fill critical skill or knowledge gaps.

Think of succession planning as a business will
Preparing for your departure — whatever the reason — can save your loved ones (either involved family heirs or your employees) from having to make up their own roadmap as they learn to drive.

Continuity is not accidental. It also signals to any investors or shareholders what the intention is for the direction of the company.

Without a well-structured, formal succession plan in place, you’re risking:

  • Unprepared or unsuitable leadership
  • Disputes for control/direction of the company
  • Unnecessary legal fees and protracted proceedings
  • A reshaped or ignored company vision
  • Financial instability
  • Inability to retain/recruit top talent

A pre-emptive consultation with a qualified CPA can help to alleviate most corporate headaches and reorganizing pains that can arise during a leadership change. Otherwise, it can be a protracted, contested tangled mess of lawyers and more CPAs, costing your company far more than if you planned a smooth exit.

And nobody wants that for a legacy.

Estate Planning: CPA or Attorney? How About Both?

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If you’re thinking about the future, specifically how to build long-term financial stability for your family, estate planning gives you control of how your assets are dispersed when you’re gone.

As the saying goes, you can’t take anything with you, so making a plan in advance is a vital step in ensuring that your wishes are carried out, no matter how much your assets are worth. Protecting your legacy is one of the most thoughtful things you can do for your loved ones.

Many certified public accountants (CPAs) and attorneys offer estate planning services. But choosing one (or both) comes down to your needs and goals:

CPAs. With a wealth of tax law knowledge, a CPA can offer financial expertise, especially in the areas of estate laws and gift tax laws. They can also advise on how each estate planning tool will impact taxes and fees and can strategize to help families and individuals minimize their tax liabilities. (For example, it may be possible to eliminate estate tax by simply leaving all property to a charity.)

And because a CPA also prepares their clients’ tax returns, they’re aware of personal tax information that can require changes to estate plans and can watch for administrative estate planning issues.

Estate planning attorneys. Like a CPA, attorneys can lend their vast knowledge on wills, trusts and business succession matters, while addressing other legal implications of an estate plan. They specialize in more precise areas of concentration, such as evaluating estate planning options to benefit future generations, drafting a last will and testament, appointing guardians for minors, granting living relatives a power of attorney and preparing a living will to outline end of life decisions.

Working in tandem

When considering estate planning goals, clients may leverage the insight and experience of both professionals. A CPA who works with an attorney on their clients’ behalf can save them time, money and headaches — maximizing tax breaks while efficiently managing the distribution of their assets.

And when sharing a client, a lawyer and CPA are in regular contact, communicating any changes in their planning, adding value in their areas of specialty and improving outcomes for the client and their loved ones.

Collaboration is key

At Magone & Company, we believe that open, ongoing dialogue is critical for building wealth now — and planning what to do with it in the future. We have the tools and knowledge to help create lifelong financial stability and success for your family. Contact us for a complimentary assessment at (973) 301-2300.

 

Family Businesses: What it Takes to Keep Them Strong and Sustainable

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Like their public counterparts, nearly all family business leaders are concerned about short-term revenue loss and cash flow these days. However, recent research shows they’re feeling confident about weathering the storm in the long term.

Family businesses, by definition, are survivors, according to Professor José Liberti of Northwestern University’s Kellogg School of Management. “If you start thinking about families that are four generations, three generations, they have learned through experience and faced hardships through time,” he says in an article on the university’s website.

It’s widely acknowledged that family businesses that have endured the hardships of multiple generations share the same traits that will sustain them through the current crisis and beyond. According to a joint study by The Harvard Business Review and the Family Business Network International, some of these traits include:

A shared value system
The joint HBR and FBNI report concludes that shared values not only provide a moral center for family businesses to withstand challenges; they also provide a means for the business to differentiate itself in the marketplace.

A shared vision for the future
With a common vision, the family business is better able to set goals and determine priorities. Shared visions support the family’s commitment because they are meaningful (which supports agreement on difficult decisions), engaging (which encourages talent development) and future-focused (which supports long-term planning).

Clarity about everyone’s role
Successful family businesses are ones in which everyone has clearly defined roles and responsibilities. These definitions are essential for avoiding conflict that often occurs within families. Clearly defined roles avert overlapping responsibilities and expectations.

Cohesion, interaction & communication
The joint HBR/ FBNI report defines this as “mutual understanding, respect and support, and a healthy exchange of ideas and discussion of key and delicate issues.” The study concludes that these behaviors determine the family’s resiliency and ability to respond to change.

Succession planning
An effective succession plan details the succession process and the standards used to determine when the successor is prepared to lead. Again, roles must be clearly defined for family members who will remain in the business. The plan must firmly establish that managerial aptitude is more critical than birthright, even if it means hiring a non-family member to lead the organization.

The good news and the bad news
The bad news is that FBNI’s study found that 40% of family businesses underperform in at least three of the areas noted above. The good news is that definitive action can help family businesses stay strong and sustainable.

Not sure what actions to take? An objective advisor can help take the emotion out of the discussion and get everyone on the same page. At Magone & Company, we know family businesses because we are one. Let us know how we can help keep yours strong for generations to come.

Is the NJ brain drain dooming your organization’s future workforce?

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Sure, the taxes may be high, but by and large the Garden State is an opportunity-filled place to live and work — especially for NJ-based companies that require a wide range of skill sets across their workforce.

But when we’re the only state losing 20,000+ students annually to out-of-state colleges, what’s the impact on future hiring? This so-called “brain drain” — high school students heading across state lines for their higher education — has been going on for decades. Combine that with the mass exodus of more than 500,000 millennials, and you don’t have to be an economist to predict the looming impact on the state’s labor pool — talent shortages, skilled positions going unfilled and costly retention issues as employees realize who’s in the driver’s seat.

This phenomenon is also expensive from a tax standpoint. New Jersey spends roughly $19,000 per student on K-12 education, landing it at the top of the list for per-pupil spending. That’s a steep investment in a future workforce that’s not guaranteed to stick around.

Why are so many students choosing to attend college elsewhere?
One reason is proximity, according to Joyce Strawser, Ph.D., dean of the Stillman School of Business at Seton Hall University. She says, “It’s so easy for a NJ high school graduate to enroll in a great university located within a two- to two-and-a-half-hour drive. That student may likely feel that he or she has the best of both worlds — the exciting opportunity to live and learn in another state, while maintaining the safety net of being a short drive or train ride from home.”

On the positive side, Strawser feels that the issue speaks to the quality of graduates the state produces. “Our high school students are academically competitive — attractive candidates who are heavily recruited by nearby colleges and universities.”

Shifting the tide to in-state higher education
In-state colleges are the first line of defense in attempting to reverse the talent exodus. And many, including Seton Hall, are getting creative in raising their profiles among high school students, moving beyond the typical “Open House” and hosting high-interest programs that bring these students to campus.For example, Strawser’s Stillman School hosts a half-day visit for Bridgewater-Raritan High School students twice a year — and has seen enrollments from that school district increase significantly as a result. Stillman also presents an annual “Strictly Business” program, a half-day immersive introduction to programs, faculty and students, during the New Jersey Education Association Convention.  “Because many of our high schools do not hold classes during the NJEA event,” she says, “it’s a convenient time for NJ students to visit our campus.”

Future-proofing your NJ workforce
If you’re planning on remaining an NJ-based company, now’s the time to think proactively about the future of your workforce. Though you can’t control where students choose to attend college, you can take steps like these:

  • Benchmarking —Examining both industry-specific and general market data can help you ensure your compensation and benefit packages are competitive or better.
  • Succession planning — Identify mission-critical roles across your organization and the skills necessary to succeed in them, then map out (or recruit, if you don’t find any) potential candidates to develop.
  • Organizational soul searching — What would it take to become known as an employer of choice? Whether that’s reinforcing your commitment to social responsibility, improving organizational culture or raising your profile by engaging a strategic PR firm, these tactics don’t yield results overnight. Start now so you’re positioned for success.

With so much home-grown talent and potential, it’s a tough loss to see other states — and their business communities — reap the benefits of NJ’s educational system. Our state is a difficult enough place to do business without the added stress of a workforce lacking the skills we need to remain competitive.