Advisory board, prepping next gen are keys to succession

The owner of a family business who envisions his company being passed from one generation to the next must ensure his children are prepared to take the baton.

The owner of a family business who envisions his company being passed from one generation to the next must ensure his children are prepared to take the baton.

“You are not preparing your kids to take over the business if they are living in your basement,” said Tom Garrity, managing partner of Compass Point Consulting LLC of Hanover Township, Northampton County.

Garrity, like other business consultants, sees this sort of scenario at family businesses all too frequently. It is part of his job to educate owners of family businesses on how to effectively turn ownership of the company to the next generation.

Those in business coaching say that family governance is an essential component in succession planning. To preserve the wealth and become a multigenerational company, family business owners need to communicate with their sons or daughters, groom them to take over the business, make them members of the company advisory board or foundation and teach and educate them on the inner workings of the business.

“It is about determining what is our operating policy, how to bring your kids into the business, how that person will be compensated and also having an advisory board that has board members who are outside of the family,” Garrity said. “If you can get those things working together, you have a good shot at keeping the business running in the next generation.”

At Continuous Financial Improvement in Center Valley, owner Gerry Pandaleon said she always recommends an advisory board for a family run business, especially those where owners have several children and each of those children are to inherit equal shares. That advisory board, for several reasons, should have nonfamily members.

“Sometimes family members are pitted against each other, and they equally feel they have a vote and can run the business,” Pandaleon said. “An advisory board forces a family to sit and discuss issues that must be talked about.”

She added that an advisory board works when the people in it are logical and take into account the advice of third-party members, banks and customers.

At Peerless Business Advisors in Center Valley, Philip Mason is a certified family business specialist.

He agreed that it is necessary for the next generation in a family run business to be brought into the fold.

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