Transition plan vital for a family owned business, experts say
Even if you have no immediate plans to sell or transfer your family-owned business, having a transition plan in place now is essential, according to a panel of experts speaking Thursday at the Daily Herald Business Ledger's Newsmakers Forum on managing a family business.
About 90 suburban executives and entrepreneurs gathered for the discussion at the Drake Oak Brook Hotel.
An increasing number of family-owned businesses are beginning to look to pass the reins from one generation to the next, but many do not have transition plans in place. The lack of a plan can affect not only that generational transition, but also the business itself if the current owners suddenly could not run the operations, speakers said.
"Regardless of whether you want to have an ownership transition plan or not, you have one right now," said Jeffrey Conrad, a partner with BKD CPAs & Advisors in Oakbrook Terrace. "It may not be the one that you want, because if you're not here tomorrow, something will happen to your ownership and someone will have to manage your business."
Conrad said elements of a good transition plan need to define the lines between ownership and management, manage the risk that control could transfer outside the family and provide fairness among family members -- those who work in the company, as well as non-participating family members.
Natalie Perry, a partner with the law firm Ice Miller LLP in Lisle, said communicating the plan among family members is also an important step in assuring the generations understand and respect it.
"We talk to clients about being upfront with their children, but sometimes they feel uncomfortable about doing that or it's going to be a discussion that's had after the family member is gone. And there can be hard feelings," Perry said.
"Communication is key. Those can be hard conversations to have, but I think it's important to tell the kids," she added.
Nirel Inman, co-president of Chicago Glue Machine and Supply Co. in Itasca, spoke about her role as the second generation owner in the unusual situation of being a 50/50 partner in the business. While experts tend to recommend against such a partnership, Inman said watching her father and his partner work out differences helped her and her current co-owner to maintain a successful business.
"Our dads always had lunch together every day," she said. "A lot of conflicts were resolved in a very timely fashion, because they didn't fester, they were out of the office and they talked those things out."
Inman added that because she was part of the first generation's discussions on business as she grew up, the second generation partnership "came together as a united front, and that's ultimately how we excelled at the business and gave our parents the confidence."
Josh Tubero, president of Alliance Disaster Kleenup, talked of how he and his brother learned from his father's entrepreneurial efforts, leading them to start their Wheeling-based business. As a result, their company is focused on building up their employees, on both a professional and a personal level. In addition to offering career education, the company holds sessions to educate employees on issues like mortgages and car loans or leases.
"Our goal is to create livelihoods for other people, and create a platform for people to grow professionally, but even more so personally," Tubero said.
When asked whether he and his brother thought about a generational transition, Tubero said he ideally would like to see the business become employee owned.