Progressive Grocer Independent

OCT 2014

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22 | Progressive Grocer Independent | October 2014 Business Review and others show that when they are well managed, family businesses have the potential to be the best companies," observes Paulo Goelzer, president of IGA Coca-Cola Institute, in Chicago. But here's the catch: "Te family needs to be man- aged as much as the business, the employees and the fnancial com- ponents," advises Goelzer, "and the family agreements should be mapped out before the next generation comes in, before people are married and have children, if possible, with the values of the founders at the forefront." Goelzer agrees with Kirlin that the timeframe is "the sooner the bet- ter," with the idea that the inevitable death or contingency of a family owner will occur; it's just a question of when, and — for the sake of the business — assuring it comes after a succession plan is in place is often imperative for survival. The Wake-up Call It took the plane crash death of an early business partner for Hal Neiman, now the CEO of Alpena, Mich.-based Neiman's Family Market, which cur- rently has four grocery stores and more than 400 employees, to wake up to the idea that his family business needed a formal succession plan. While the business started in 1983 with Neiman, his father in-law and other partner/ investors, it wasn't until 2005, after the death of the partner and other changes, when Neiman and his wife, Jean, became the sole owners of the business. Even then, no real succession plan was put in place, but Neiman was jolted into thinking about one. "When Doug died, suddenly we realized, 'Wow, we really don't have a good plan,' " Neiman recounts. Eventually, Neiman's two sons, Bryan and Nate, and his daughter, Amy Rogers, all became active in the business — Bryan is now the president and south stores supervi- sor, Nate is the north stores supervi- sor, and Amy is the human resources director for the company. "By 2009, we were aware where we were going with this company," Nei- man explains. Te company was connected to a succession planning expert and other fnancial advisers who had experience working with small companies through its wholesale account manager. "I was in my late 60s at that time — we knew we needed to do something." Neiman recognizes that he waited too long to put a plan in place, and was lucky that no dire consequences resulted. But he also believes he now has the correct plan, which leaves no stone unturned regarding succession. Following are some best practices for a successful succession plan. Retreat and Conquer Many family businesses take retreats to plan or re-evaluate the family succes- sion plan. Te Neiman family gathered at a second family home, inviting all of the key family members (includ- ing their spouses), as well as fnancial advisers and the company attorney. Te frst item on the agenda was to give everyone a personality assessment test to see how they all functioned and interacted with one another. "It was a great experience; we all got to talk- ing to one another more in depth, and even though we are family, we learned a lot about one another," Neiman says. "Tere was a great amount of laughter." And laughter is good — it was the ice breaker that allowed everyone to openly discuss his or her current role in, and the next generation of, Neiman's Family Market. "With the help of the advisers, we dissected everything and were exhausted at the end, but it was a neat process and we had experts who could transfer our layman ideas into legal documents," Neiman says. Family retreats or meetings are a good way to set up the process for addressing con- cerns, according to Kirlin. "Each and every owner/ family member should be brought into the process and be fully informed as to what the succession and transfer plan is and how it afects them," he notes. Go Beyond Estate Planning Owners of privately held businesses often lump succession planning into estate planning, but "that's the wrong ball," Kirlin says. Estate planning can certainly be part of the plan, but a much larger scope is actually needed. According to Kirlin, there are three major areas every family business should address in a formalized succession and ownership strategy: 1. Strategic Business Plan, which should include all aspects of succession — keeping or selling, leadership and the vision; 2. Family and Personal Wealth Plan, which should separately address fnancial security issues of both the fam- ily and the business when the business is passed on, or when there are contingen- cies such as death, disability, divorce or when a partner wants out; and 3. Legal Plan, which involves keeping the documents up to date and regularly reviewed. In a nutshell, conventional estate planning isn't the sole solution, it's part of the solution. "Wills and trusts are primarily dis- tribution plans; they do not fx a busi- ness succession problem," Kirlin warns. Family businesses that avoid the responsibility of formal succession planning take the risk of likely killing the business within a generation or two. Feature Succession Plans

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