According to the Family Business Institute and the Family Firm Institute, about 30 percent of all privately owned business will not succeed into the third generation.
Evanston, IL (Vocus/PRWEB) April 04, 2011
More family and independently owned businesses will change leadership in the near future than ever before. “Depending on which study you look at, it’s estimated that 10 to 12 million baby boomers will retire and exit their businesses before the end of this decade,” says Richard A. Morris, principal of ROI Consulting in Evanston, Ill. The impact of this transformation will ripple throughout the U.S., given that privately held businesses make up about 50% of the GDP and represent more than 99% of all employer firms in the nation, according to the U.S. Small Business Administration.
Jennifer Kruger, Senior Editor at PMA, the worldwide community of photo imaging associations, wants to be sure her industry navigates this landslide of transition successfully. She recently interviewed Morris on the Imaging Executive Podcast to provide insight and guidance on strategies for successful succession. “His advice is valuable for any industry, and we hope more than just our members will tune in,” Kruger says.
Unfortunately, many businesses do not survive leadership change. Morris points out, “According to the Family Business Institute and the Family Firm Institute, about 30 percent of all privately owned business will not succeed into the third generation.” He also provides other startling statistics, accumulated through years of research. About 50% of privately-held businesses have poor or no estate tax planning. More than half lack a governance structure that will support new leadership, and about 90% have not yet chosen the next leader of the business.
“These are essential ingredients to insure that ownership of a business will transfer successfully,” he tells Kruger. If the owner plans to sell the business, it’s critical to keep the business growing, identify financing options and get a clear picture of what the business is actually worth. Pointing out that most exit strategies require at least 10 years to implement, Morris suggests, “Don’t wait too long.”
During the podcast, Kruger zeroes in on the key questions business owners need to think about to be ready for a succession or transition: “When should business owners begin thinking about and planning for succession? What steps should they take and what plans should they have in place prior to handing the business over to the next generation? What factors should they consider when choosing the right person to take over the business? And how does the transition process differ when we’re talking about a family-owned business?”
Morris provides a wealth of insightful – and sometimes unexpected – answers, such as, “The time to start thinking about your exit strategy is the day you open your business. Issues like buy/sell agreements are easier to negotiate before your business has become successful.”
If you’re thinking about passing the reins of your business to new leadership, this interview is a must-listen. To hear the full interview, go to http://imagingexec.com/-strategies-for-successful-succession. Other podcasts with Kruger can be heard at http://www.imagingexec.com/.
In addition, Morris provides a treasure trove of free resources on his website ROI Consulting (Resource for Ownership Intelligence). These include a Business Transition Readiness quiz, a Family Business Growth Calculator, podcasts and articles geared specifically toward educating the owners of family and privately held businesses.
Richard Morris is principal of Evanston-based ROI (Resource for Ownership Intelligence) Consulting which helps family owners expand and pass down their business to subsequent generations. He also provides family business education, consulting and strategic planning for cooperatives, franchises and associations, and is an adjunct professor at the Lake Forest Graduate School of Management. Previously, he managed marketing and acquisitions for his family's 80-year-old privately held company, Fel-Pro Incorporated, and served on its Board of Directors until the sale of the business in 1998. Morris also co-authored the book “Kids, Wealth and Consequences: Ensuring a Responsible Financial Future for the Next Generation”, (Bloomberg Press).
PMA – The Worldwide Community of Imaging Associations is a professional trade association, PMA® helps the worldwide photo imaging community achieve business success and adapt to new technologies. Its commitment to members in 100-plus countries is part of an 86- year legacy that connects business owners to a network of knowledge and support. PMA furthers this purpose through the development of educational programs, marketing research, publications, and trade shows. As a not-for-profit organization, any success PMA achieves in its endeavors directly benefits the industry, providing the means to continually develop services and activities for members.
# # #