Planning To Keep It All In The Family
The future should be considered from the start
By Phyllis Hanlon
Running a family-owned business is a challenge in and of itself. Negotiating between family members and multiple generations is not an easy task, especially when money is involved.
But keeping that business in the family can be more of a challenge, and requires careful planning.
No One Size Fits All
Attorney John Shoro, head of the estate, financial and tax planning practice area at Bowditch & Dewey, emphasizes that succession planning for family-owned businesses does not fit into "one general blueprint," but should be considered on a case-by-case basis. "Only then can you come up with a plan, given all the variables," he said.
While the type of family business - S Corp, sole proprietorship, LLC, partnership or something else - ultimately determines the company's future direction, Shoro explained that some basic issues are common to all situations. Owners need to ask when, to whom and how they will pass the company on to others.
"Owners have created an entity. They now need to figure out its value and how much control they want to give away," Shoro said.
Ideally, succession planning should begin at the time the business is created, although this seldom happens. "Most businesses keep in flow and are not thinking of the end," Shoro said.
While succession planning can be relatively simple, Shoro points out that it's critical to involve future owners in the business well before the hand-off takes place.
Checkerboard's Story
In 1992, Micah Chase, CEO and president of Checkerboard Ltd. in West Boylston, never dreamed he would sit at the helm of his father's company.
At that time, he was working with a virtual reality startup in San Francisco. He responded to a call from his father, but anticipated a return to the West Coast within four years. However, he soon found the family business an irresistible draw and scrapped his Silicon Valley plans.
Micah Chase entered the picture during Checkerboard's infancy.
"The company was 2 years old at the time and had a good start, but was tiny," he said. The younger Chase utilized management experience gleaned from previous consulting positions to grow the business, while his father divided his time between offering advice and support to his son and nurturing his political career.
It didn't take long before Micah became absorbed by the business and knew he'd found a permanent home. His strong, close relationship with his father enabled a relatively seamless transition.
"We do have some tensions, simply because he's my father. But nobody wants to mentor you like your father," he said. "It could be difficult to go your own course, but my father made it easier than most."
Mutual respect and willingness to listen to each other's opinion provided a solid training ground. Micah Chase added that clearly defining roles helped to further advance the company and keep it all in the family.
The Training Associates Tale
In 1994, when father-daughter team Vic and Maria Melfa co-founded The Training Associates in Westborough, the line of succession had already been established.
Vic Melfa explained that their succession plan began with the birth of their company. "We always expected that I would move out. How you move out is the big question," he said.
The Melfas consider the last 13 years an important training period.
"For the last year, I have been sitting in [my father's] office for all meetings," Maria Melfa said. While the co-founders have different personality types, the daughter has developed her own leadership technique.
"We will not be the other person. We have to discover our own management styles," she said. While Maria Melfa focuses on the bottom line, she noted that her father is detail-oriented.
Originally executive vice president in charge of day-to-day operations, Maria Melfa has recently been promoted to president in anticipation of her father's departure. When she assumes full leadership, Vic Melfa plans to slice his 60+ hour a week in half, but will maintain a presence as consultant.
Although the company will remain in the family, Vic Melfa reported a potential slight twist. "Along with the transition, there is a good chance a large, international company might acquire and partner with us. They'll use our capability to develop, manage and deploy trainers," he said.
Phyllis Hanlon is a freelance writer based in Charlton.
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