Issue link: http://read.dmtmag.com/i/31498
14 GUEST COMMENTARY www.securitysystemsnews.com MARCH 2011 SECURITY SYSTEMS NEWS Tim Purpura, PUBLISHER tpurpura@securitysystemsnews.com Brook Taliaferro, EDITORIAL DIRECTOR Martha Entwistle, EDITOR mentwistle@securitysystemsnews.com Daniel Gelinas, MANAGING EDITOR dgelinas@securitysystemsnews.com Tess Nacelewicz, ASSOCIATE EDITOR tnacelewicz@securitysystemsnews.com Peter Macijauskas, E-MEDIA MANAGER pmacijauskas@unitedpublications.com SEND PRESS RELEASES TO: EDITORIAL OFFICE editor@securitysystemsnews.com Tel: 207.846.0600 Fax: 207.846.0657 ADVERTISING OFFICE Security Systems News 106 Lafayette St., PO Box 998 Yarmouth, ME 04096 Tel: 207.846.0600 Fax: 207.846.0657 EAST Tim Purpura, PUBLISHER Tel: 207.846.0600, ext. 217 Fax: 207.846.0657 tpurpura@securitysystemsnews.com WEST Gregg Shapiro, ASSOCIATE PUBLISHER Tel: 207.846.0600, ext. 273 Fax: 207.846.0657 gshapiro@securitysystemsnews.com MARKETPLACE & LIST RENTALS Cath Daggett Tel: 207.846.0600, ext. 300 Fax: 207.846.0657 cdaggett@securitysystemsnews.com Glen Halliday, PRODUCTION DIRECTOR Brenda Boothby, CIRCULATION DIRECTOR EDITORIAL ADVISORY BOARD Bill Bozeman, CEO/President PSA Security Network Daniel G. Decker, President Safety Systems Inc. John Mack III, CEO Imperial Capital Jack Mallon, Managing Director Mallon & Associates Dave Merrick, Marketing Director Vector Security Peter A. Michel, CEO iSECURETrac Richard Perry, President Security Networks LLC Lisa Prosser, Owner/President General Alarm Inc. Tony Smith, President Security Finance Associates Greg Spurr, Vice President TD Bank, N.A. Tony Wilson, President CMS F A When employees buy in name change always generates a lot of interest and discussion. Remember when Brink’s Home Security changed its name to Broadview? When Securitas became Niscayah? It certainly makes for fun watercooler conversations. In February, we had another name change: Summer model giant APX Alarm changed its name to Vivint. What do you think of the new name? I’m getting used to it. Names are important, of course, but in the long run, it’s what you do with that name that matters. What was interesting to me is the way the name was introduced. While it was officially announced on Feb. 1, and came as a surprise to many in the industry, it was old news to Vivint employees. They knew about the name change for weeks. And though APX had the help of branding professionals, it was a group of 150 managers who voted on the final choice. The name was chosen by Nov. 1. and “that was the beginning of the employee involvement,” Kristi Knight, Vivint VP corporate communications, said. After that, employees voted on the color choice for the brand. In December, executives held a series of meetings with employees to “explain the name, what it means and why we are changing the name,” Knight said. In January, executives had a conference call with all of the field and service staff to do the same thing. On Jan. 31, the day before the name change was announced to the industry, Vivint threw a big bash in at the Provo headquarters. The event was simulcast to the Minnesota monitoring center, so those employees could feel a part of it. Among the festivities in Provo was a rap about Vivint, written and performed by a customer service employee who’s working at Vivint while he studies for his master’s degree. Martha Entwistle That’s not the kind of corporate spirit you find in every business. Alex Dunn, Vivint COO told me: “Rebranding is as important for our employees as it is for anyone ... We’ve had a tre- mendous amount of internal communications and meetings. And the name change itself is not the point, the point is expanding our focus.” Now the real challenge begins. Vivint is not the first security company to expand into home automation. Others in the industry are doing it now, or plan- ning to do it. Will their sales model work with these ser- vices? Will consumers like what they’ve got to offer? Will the adoption of home automa- tion be as quick as Vivint execs predict? That all remains to be seen, but they’ve clearly got their employees on board, and that’s a good start. Keeping the family business amily-owned businesses account for 90 percent of American enterprises and, based on my nearly 20 years in the elec- tronic and life safety industries, I estimate that an overwhelming majority of industry busi- nesses are family owned. Most family-business owners want to keep their business in the family, yet nearly one-third of these companies don’t make it to the next generation. (This is known as the “Rule of Thirds.”) Succession planning for family-owned businesses is complicated and doesn’t happen on its own. SUBSCRIPTION INFORMATION www.securitysystemsnews.com/subscribe Security Systems News PO Box 1742 Lowell, MA 01853-1742 Tel: 978-671-0449 Publishers of specialized business publications PRESIDENT & CEO J. G. Taliaferro, Jr. VICE PRESIDENT Rick Rector For quality article reprints of 250 copies or more, call PARS International Corp. at 212-221-9595 or email reprints@parsintl.com. A good succession plan must be developed and put into action years in advance of the actual transition of the ownership or manage- ment of the business. The plan must consider the needs of both the senior family members and the incoming gen- eration, including those who have chosen not to work in the busi- ness. It should also consider the concerns of non-family managers and other key employees. The actual transfer of ownership can be accomplished in a number of different ways—some of which are more efficient and more appro- priate than others. What’s right for your family and your business depends on a number of factors, including your family’s personal and economic priorities and needs. Family-business succession planning does have one absolute: Failing to plan the succes- sion of your business is the same as planning to fail. Following are five issues for family business owners to consider. Threshold issue: Every succession plan must address a threshold issue: Should ownership of the business be transitioned to the next generation or sold to a third party and pro- ceeds used to fund the owner’s retirement and the heirs’ eventual inheritance? Just because owners want to hand down their businesses to the next generation doesn’t make it the best option—or even an option at all. Navigating charged emotional issues: A fam- Eric Pritchard ily-owned business resides at the crossroads of family and work, the two most emotionally charged areas in anyone’s life, and letting go isn’t easy for those who have poured their life’s energy into building a successful business. As a result, family-business owners often focus on other issues and avoid dealing with their retirement or their transition away from the business—an all-too-familiar and frustrating scenario to second- or third-generation members of the family business. Family-business owners have to decide when and how to step away from their life’s work, but they can’t make those decisions at the last minute—and not in a vacuum. Successful succession planning takes a team: All family members, including those not involved in the business, and key busi- ness managers should participate in the planning—or at least know what is going on and why. Assemble a team of knowledgeable professionals, including a lawyer, accountant, financial advisor, valuation expert and perhaps a family systems therapist or professional facilitator. Consider creating a family advisory council, which functions as a board of advisors on matters of family and family business. Select a successor: This can be the single most difficult and emotionally charged chal- lenge in succession planning. Are you really sure your son or daughter wants to take over the reins? Have you actually asked them—or has it always just been your assumption? Family businesses are more successful when one person is in charge, and grooming the right successor takes time. Owners must put the designated successor in a position of authority, a tricky situation when siblings, cousins or other family members are involved in the business. Is the plan fair? Fairness is another emotionally laden concept for families who own businesses. In addition to the question of who is in charge after the transition, how will other members of the family be compensated? Family-business succession planning is necessarily intertwined with the owner’s estate planning and must consider how to most appropriately (and fairly) address the interest of family members who, for whatever reason, work outside the family business. If the business is to be sold to family members, the price (and deal structure) must not only be fair but must pass tax scrutiny—and the only “fair” the IRS cares about is the fair valuation of the business. The terms of financing must provide the owner and spouse sufficient retirement income and the company must be able to make the payments and have suf- ficient capital for business purposes. Long-time industry lawyer Eric J. Pritchard co-chairs the Electronic Security Group at Kleinbard Bell & Brecker LLP, where he represents electronic security and life safety providers nationally.