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BUSINESS DECISIONS Dave Goeller dgoeller@unl.edu

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BUSINESS DECISIONS Dave Goeller dgoeller_at_unl.edu Key Concepts Family Businesses Parent Child Role Business Partner Role Key Concepts Family Businesses Family time ... – PowerPoint PPT presentation

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Title: BUSINESS DECISIONS Dave Goeller dgoeller@unl.edu


1
BUSINESS DECISIONSDave Goellerdgoeller_at_unl.edu

2
KEY QUESTION
  • Is it time to start planning for the future of
    your business?

3
Business Life-Cycle
Source Wadsworth
4
Business Decisions
  • Business Operations Continue
  • Business Operations End

5
Business Owner
Owners priority Continuation of family ownership
assets
Owners priority Continuation of the business
Business Succession Plan Income
Management Retirement
Retirement Plan
Estate Plan
Estate Plan
BUSINESS SUCCESSOR
HEIRS
6
KEY QUESTION
  • Do you want your business to continue beyond your
    life and be operated by the next generation?

7
Business Life-Cycle
Source Wadsworth
8
Business Life-Cycle
1st Generation
2nd Generation
Source Wadsworth
9
Business Life-Cycle
Maturity
Growth
Decline
Introduction
Source Wadsworth
10
The Importance of Planning
  • We are living and working longer
  • Technology
  • Increased Volatility Uncertainty
  • Expectations
  • Coordinate Income Transfer, Management Transfer,
    Retirement and Estate Plan

11
KEY QUESTIONS
  • Do you want only Business Asset Ownership to
    continue? OR
  • Do you want a Viable Ongoing Business to
    continue?

12
KEY QUESTIONS
  • Do you want to have a Successor?

13
The Need for Planning
14
Business Owner
Owners priority Continuation of family ownership
assets
Owners priority Continuation of the business
Business Succession Plan Income
Management Retirement
Retirement Plan
Estate Plan
Estate Plan
BUSINESS SUCCESSOR
HEIRS
15
Business Succession PlanProcess
  • Income/profit Transfer Plan
  • Management Transfer Plan
  • Retirement Plan
  • Estate Plan (Asset Transfer Plan)

16
Income and Profit
  • Financials
  • How much?
  • Sources?
  • Wage
  • Incentive
  • Enterprises
  • Retirement Income?
  • Start own business

17
Income Transfer Models
  • Spin-Off Arrangement
  • Multi-Person Arrangement

18
SPIN-OFF APPROACH
C
P
C
P
C
19
MULTI-PERSON APPROACH
P
C
P C
P
C
20
Management TransferPlan
  • Three most important factors to a successful
    business
  • Management
  • Management
  • Management

21
Management Transfer Plan
  • Decision making Authority (Very Difficult)
  • Accountability
  • RiskReward
  • Coach/mentor/teacher
  • Retirement???

22
Business Succession Plan Management Transfer
Period

23
Business Succession Plan Management Transfer
Period
  • Short Transfer Period
  • owner
  • successor

time
24
Business Succession Plan Management Transfer
Period
Long Transfer Period
25
Management TransferPlan
  • Phased plan approach
  • 1 Owner make decisions (Mentor)
  • 2 Owner and successor make decisions together
  • 3 Successor make decisions

26
Management TransferPlan
  • Involves the Timing of Decision Making Authority
    for the Business
  • Involves the Timing and Acquisition of important
    Intangible Relationships

27
Retirement Planning For Succession
  • Day to day labor management
  • Fully retire
  • Semi-retire
  • Gradually retire
  • Abruptly retire

28
Retirement Plan
  • IF?
  • When?
  • Where will you live

29
Retirement Plan
  • What will you do?
  • Financial Needs?
  • Source of Funding?

30
Retirement Plan
  • Financial Needs?
  • 10,000/year
  • 50,000/year
  • 200,000/year
  • Source of Funding?

31
Retirement Plan
  • Source of Funding?
  • Social Security?
  • Pension or 401k?
  • Rental Income?
  • Sale of Assets?

32
Key Concepts
  • Family Businesses
  • VS
  • Nonfamily Businesses

33
Key Concepts
  • A Critical Difference
  • Family Business vs Non-family Business
  • The priorities, expectations, relationships, and
    measures of success in a family are, and should,
    be different than the priorities, expectations,
    relationships and measures of success in a
    business.

34
Key Concepts
  • Family Businesses
  • Parent Child Role
  • Business Partner Role

35
Key Concepts
  • Family Businesses
  • Family time
  • Work time

36
Key Concepts
  • Family Businesses
  • Communication
  • Extremely Important
  • Differentiate roles
  • Business Meetings

37
Successful Business TransitionsCommunication
  • Expectations, Expectations, Expectations
  • Regular business meeting throughout transition
    period
  • Talk about it, then write it down
  • Share with non-farm family members?
  • Surprises cause problems

38
Job Description
  • If you where to write a job description for the
    successor of your business what would it say
    regarding
  • Starting and ending time each day?
  • Breaks and lunch?
  • Job responsibilities?
  • Pay?
  • Benefits?
  • Vacation?
  • Advancement opportunities? When?
  • Evaluation Criteria?

39
Business Succession Plan The Transfer Stages
Testing
Commitment
Established
Withdrawal
40
Timeline
  • How long in each for Stage?
  • Testing?
  • Commitment?
  • Established?
  • Withdrawal?

41
Business Succession Plan The Transfer Process
LABOR INCOME
MANAGEMENT ASSETS
42
Business Components
  • LABOR..the physical work involved
  • INCOME..minus expenses equals profit
  • MANAGEMENT..decision making authority
  • ASSETS..what you own, rent or control and the
    liabilities associated with them

43
Business Succession Plan
Testing Commitment Established Withdrawal
Timeline When How Long
Labor Duties-job description
Income/profit Amount-source-method
Management Authority-accountability-decision making
Assets Who owns/controls





44
Labor
  • Job description
  • Owner
  • Successor
  • Expectations

45
Income and Profit
  • How much?
  • Sources?
  • Financials
  • Balance Sheet
  • Income Statement
  • Trend and ratio analysis
  • Cash Flow projections
  • Retirement Income?

46
Successful Farm TransitionsManagement Transition
Plan
  • How will management be split?
  • Enterprise
  • Whole farm
  • Farm activity (marketing)
  • Timeline for management transition
  • Learning or testing phase
  • Completion date
  • Parent/child relationship vs. business partner

47
Assets
  • Which assets
  • When
  • Basis consideration
  • How
  • Sale
  • Gift
  • Inherit

48
Barriers to Business Succession
  • Communication
  • Retirement Plan
  • Capital (Fair vs Equal)
  • Communication

49
Resources
  • John Baker, Attorney at Law
  • Iowa State University
  • Director of the Iowa Beginning Farmer Center
  • 800 447 1985
  • Joe M. Hawbaker, Hawbaker Law Office
  • Phone 402-558-3540
  • Email mjbaker_at_radiks.net
  • Roger A. McEowen, Attorney at Law
  • Iowa State University
  • Associate Professor of Agricultural Law
  • Phone 515 294 4076
  • Dave Goeller
  • University of Nebraska
  • Deputy Director NCRMEC
  • 402 472 0661

50
Estate Planning Questions
  • What?
  • Who?
  • How?
  • When?

51
Estate Planning Questions
  • What?
  • What do you own?
  • What is the value?
  • Who?
  • Who do you want to give it to?

52
Estate Planning Questions
  • How?
  • Will, Trust, Title, POD, Beneficiaries
  • When?
  • Time of death transfer?
  • While youre alive (Gift)?

53
Estate Planning Questions
  • When?
  • Time of death transfer?
  • While youre alive (Gift)
  • How?
  • Will, Trust, Title, POD, Beneficiaries

54
Estate Plan
  • Concepts
  • Fair vs Equal
  • Contribution Compensation

55
Contribution Compensation?
  • 1990 Networth 90,000/3 kids 30,000
  • 2012 Networth 390,000/3kids130,000
  • Contribution/Compensation
  • 50/50 Partner and Founder
  • 300,000 Partner Founder 150,000 ea
  • Partners share
  • 30,000 from 1990
  • 150,000 from growth and appreciation
  • 50,000 from Founder growth and appreciation
  • 230,000 total for Partner 80,000 each for
    siblings

56
Time Management Matrix
Activities Crisis Management Deadline Projects II. Activities Planning Relationship Building
Activities Some Calls, Mail, Popular Activities IV. Activities Time Wasters Busy Work
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