February - Albany Colonie Regional Chamber of Commerce

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“My son, Jeff, and I have beeninvolved in family-owned businesses forall of our working lives,” Sands said.“I’m a serial entrepreneur; I can’t getaway from family-owned businesses.There’s no magic to what we do. Somany of the businesses with whom wework can genuinely be helped if theystep back, perform a critical analysis oftheir business and catch problems beforethey become unmanageable.”Allin thefamilyLearn important tips for family-businesssuccess and succession planningDave Sands knows how to make a family-owned business succeed, and he understandsthe importance of succession planning in a family-owned company.After all, he has started several family-owned businesses himself, includingDorset Partners LLC, a Dorset, VT-based company that specializes in turningaround struggling, family-owned companies and preparing them for the transitionof leadership from one generation to the next.Plan accordinglySands recommends that every businessadopt a formal strategic and operationalplan that’s shared with everybody whoneeds to see it.“Typically in family businesses, thestrategic plan is whatever is discussedover the dinner table,” Sands said.“While it’s assumed that since everybodyhas the same last name, theyunderstand each other, but it’s notalways the case. Getting a formal planwritten is critical for the success of thebusiness, and it applies more to a family-ownedbusiness because of the dinnertable scenario.”Planning should not be confusedwith tactics, Sands pointed out.“Planning” is the decision process as towhere to go, while “tactics” are the stepsnecessary to get there, he said.Family-owned businesses tend to fallin love with their companies and theirproducts more so than businesses thataren’t family-owned, which can be apositive and a negative, Sands pointedout.“The good part is they have morepassion for their business,” he said. “Thebad part is they think their widget is thebest widget ever made, and they forgetbasic things like managing cash flow.They’re too concerned with making thebest widget on the planet. People whofall in love with their product or theircompany tend not to fall in love withthe general, mundane business aspects ofrunning a business.”Considering the unique dynamic of afamily-owned business, it’s a good ideato have an outsider board, whether it’s aboard of directors or a board of advisors.“Probably the best way to stay out oftrouble is to take the pre-emptive18| acchamber.org | techvalley.org
approach with a board of advisors,”Sands said. “Very few have one in place,but it’s so easy to do. If the business isfacing a problem and the family merelybounces ideas off one another, you keepgoing in a circle, rather than bring infresh ideas from the outside. I’ve alwayshad outside boards, and I’ve served onoutside boards; they see things that thefamily members themselves just don’tsee.”Sands tends to favor a board of advisorsbecause they don’t have the fiduciaryresponsibility of a board of directors,and they’re freer to express theiropinion.“You should bring in a group ofthree or four people to be your advisors,preferably people who are not on yourpayroll,” he said. “You don’t necessarilywant your attorney, accountant orThe future is nowIn terms of succession planning, it’snever too soon to begin the process,Sands pointed out.“You should start succession planningtwo weeks before you die,” he said.“If you know when you’re going to die,it’s easy; if you don’t know when you’regoing to die, then you should start itnow.”A succession plan should be one ofthe tactics used in the implementationof the strategic plan. The criteria of asuccessful succession plan are identifyingthe people who are best suited tocarrying out the strategic plan and capableof leading the company in the developmentof future strategic plans. Theboard of directors or advisors should bean integral partner in the developmentof these succession tactics.Sands recommends that familyownedbusinesses utilize insuranceagents to ensure that there’s enoughmoney to buy out the stock of theowner or another shareholder upon anuntimely death.“Any money you put into a cashinsurance plan is protected from creditors,”he said. “Even though everyoneplans on not getting into financial problems,the economic downturn of thepast year has proven that there arethings beyond all of our control thatcan force us into bankruptcy or otherAny money you put into a cash insurance plan is protected from creditors. Eventhough everyone plans on not getting into financial problems, the economicdownturn of the past year has proven that there are things beyond all of ourcontrol that can force us into bankruptcy or other serious problems.banker; you want businesspeople whoknow and respect you, with whom thefeelings are mutual, and who aren’tafraid to tell you what you might notwant to hear.”Timing of transfersA typical succession plan has two elements,which should be considered separately::: The transfer of power, whereby controlover the business’s operation istransferred to those best suited toexercising it:: The transfer of assets, whereby thewealth concentrated in the business istransferred to designated family members,who may be a different or largergroup than the person or persons whowill be assuming power.Transition of the control of a familybusiness can take place over a period ofmonths or even years, depending on theneeds and wishes of the family membersand the business itself.As the successor gains confidenceand credibility in day-to-day operationsand dealings with outsiders, the foundercan back away into an advisory role. Ifthe founder encounters difficulty in“letting go” of the business entirely, thesuccessor must be prepared to be reassuringand supportive and ensure sometype of ongoing role for the founder sothat he or she feels included.If the successor resists, it may onlycause the founder to become more rigidand the successor to become more frustrated.Transitions are stressful timesand must be dealt with on an objectivebasis by the successor at all times.A transition plan or timetable shouldbe roughed out initially to assure continuityof management, and should bereevaluated periodically to see if goalsare being achieved. The transfer ofpower can be seamless and subtle ifgood communications and careful planningare practiced by all parties to thetransition.serious problems. Wouldn’t it be nice tohave some money put aside that thecreditors and courts can’t touch? A cashinsurance plan also provides that insurancevalue to protect the company inthe event of an untimely death of one ofits members.”Although leadership from a CEOand input from a board of directors oradvisors are important, your customersshould play a significant role in determiningyour company’s direction,according to Sands.“Unless you are or have identified atrue visionary within your company,you should be listening to your customersmore than your executives,” hesaid. “Social networking Web sites canbe a valuable tool to find out what consumerslike and dislike about yourproducts or services, yourself and yourcompetitors. As a president/CEO, don’tFebruary 2010 | VISIONS | 19
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February - Albany Colonie Regional Chamber of Commerce

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