Own a Business? Plan Your ExitOctober 28, 2015 – In The News
Wendy Wolff Herbert and Douglas J. Zeltt were featured in the PrincetonInfo article “Own a Business? Plan Your Exit. Full text can be found in the October 28, 2015, issue, but a synopsis is below.
Most people only think of starting and running a business in order for it to be successful. Although this is a good start, passing it on to the next generation is an area that people tend to forget until it is time for someone else to take the reins.
Fox Rothschild’s Wendy Herbert and Douglas Zeltt say you can save yourself and everyone in your company a lot of stress if you think about exit and succession early, especially when it involves handing the business down to your children.
Wolff and Zeltt dedicate part of their practice to counseling business owners which is no surprise when considering their pasts. Both had fathers who owned businesses at a point of their lives and they did not make it past the second generation due to uncontrollable circumstances.
In the case of Wolff’s father, the dynamics of the industry changed enough to make the business type less viable. But when it comes to businesses that can continue, she says, there’s no reason they shouldn’t, as long as business owners, family members and coworkers talk.
Starting conversations early can set a business on a good course for success. “You can’t plan too early,” Wolff says. Zeltt adds that identifying who is going to assume which roles in the business is a key aspect of this conversation.
Unfortunately, he says, most people who call for his services about transition planning do so in “fire drill” mode; in other words, they only think about what to do when the owner cannot continue operating the business which causes chaos. “Rarely is a good plan one that comes about in an emergency,” he says.
Wolff says that one of the largest complications for any entrepreneur is to learn to diffuse responsibility and authority in the business he has built, a business owner must learn to let go over time. He must delegate and converse with those who will be next to lead.
It is also important for family members to talk among themselves. Rarely, she says, do family members try to figure out who is going to act as president, who will be CFO, or what to do about the one sibling who wants nothing to do with the business but still expects a share. Zeltt adds that knowing how each person sees the future of the business and what each thinks will be the right course are important considerations
Such topics, Wolff says, aren’t necessarily pleasant ones, but knowing the answers to such questions as early and as thoroughly as possible will more likely put a business in that rare company of those that survive past the first generation or two.
For owners, Zeltt says, it’s important to know what you actually want to leave your successors, family or not. “Does the owner want to leave monetary wealth and that’s it,” he says, “or does he want to leave a legacy that will carry on? You have to ask, what’s your goal? Do you want to liquidate or do you want to perpetuate?”
Business owners should make sure that they have solid advisors for exit and succession planning. Because leaving a business involves a lot of jobs, titles and money, financial advisors are necessary.
Although this is true, Wolff and Zeltt caution against trying to find advisors late in the game. “One thing I harp on is that business owners can’t just pick up a phone and say ‘I’ve got to build my team,’” Zeltt says. “It takes time to build those relationships. It’s not something you get instantly, it’s something you earn.”
Wolff adds that, given so many businesses these days have three generations working together, younger workers should not be afraid of tapping into the experience and advice offered by those who have worked in the industry or company for a long time.
It is important for business owners so start these conversations early in order to give their business the best chance to succeed in the future.
“People usually call us at a crisis point,” Wolff says. “That’s not good.”