Oil Prophets

Winter 2016

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16 Oil Prophets Family owned businesses are at the heart of American enterprise. By some estimates, 90%, some 24 million-plus firms, are family owned. These firms employ 62% of the workforce and account for about 64% of the U.S. GDP. They account for 78% of new job creation in the country. By any measure, independent family owned businesses are critical to the U.S. economy. Today, these businesses are facing serious challenges. "Big box" companies are putting the squeeze on independents. Workforce issues like loss of key personnel to retirement and difficulty in finding skilled employees with a good work ethic face every business owner. Perhaps the most critical challenge facing our businesses is transition. It's estimated that by 2017, 40% of small business owners will retire… baby boomers ready to move on. Now here's the scary part. Only 31% of small business owners say they have any estate plan beyond a will. Some 47% admit they do not have a good understanding of estate planning or taxes. Few have clear plans for transferring the business to the next generation and where there is no heir, few have a clear exit strategy. We know that the success rate in transferring family businesses to the next generation is dismal…44% survive the first generation, 40% survive the second generation, 15% survive the third generation, and then it drops off to 1% or less in the generations that follow. It's never too early to begin thinking about an exit strategy. If you wait until the point where you are thinking about retirement, you're probably behind the curve. If You're a Business Owner If you're a family business owner, it's important to start thinking about the transition process earlier rather than later…at least five years out. By focusing on three areas, you can increase the odds that the business will continue. Focus on the business. Every successful transition hinges on having a sound business to pass on. Strategic planning is important here. Where is the business now? Where can it go in the next 3-5 years? What challenges need to be addressed? Are there resource issues? Do you have an heir who will be ready to take over the business? Do you have an heir who wants the business but is too young or too inexperienced to take over? What happens if there is no heir apparent? What key business relationships do you need to broker for the upcoming generation? What skills and Ensuring a Future for Your Family Owned Business by Jan Flynn, Ph.D.

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