You’d like to retire from the business you’ve built over the last umpty-ump years and your kids are fighting to see who gets to be the new CEO, etc., etc. The easiest thing to do would be to sell everything for whatever it would bring and spend the money on yourself, but your spouse and kids have other ideas. You are aware that 70% of all family businesses fail before reaching the second generation, and that almost 90% of the remaining businesses don’t make it into the third generation. What do you do?

The business you build from nothing has been your life! You don’t want to throw it in the trash by closing it forever, and selling it would probably cause a change the name, focus, and everything else. Neither of these options appeals to you in any way, and if you give it to the kids, you will probably encounter as many problems as those of the other options put together! Here’s one business owner’s story and ultimate solution, one that I can recommend to anyone with similar challenges!

THE BUSINESS
Victor Cagnazzi, Sr. had a better idea. Thirty-one years ago he invested $3000 (a lot of money at the time) into a new business that became Integrated Service Group (ISG). In 1999 the business passed $74 Million in annual sales. ISG currently is involved in technology and business consultation, systems integration, network design, voice/data/video convergence technology and other similar tasks (www.isgny.com).

SUCCESSION CHALLENGES
Victor Sr. wanted out. The options were to sell the business, give it to his children, or dismantle everything and sell the parts. At the time, the business was worth $4 Million, the four sons and a daughter were in their 20s, and Victor Sr. had no retirement program. The children said, “Whatever you want, Dad.” So, working within the IRS guidelines of gifting policies and one-time unified gifting, Victor Sr. transitioned the business to his children.

With the decision made to transition the business, the problems of competitiveness started to surface. “Who would be the best person for CEO? What if the daughter-in-law wanted a job where she wasn’t qualified? Should the oldest child get the prime position? Should the sibling who had worked in the business the longest get the lion’s share of the business?” These were tough questions, and they were just the first of many. What to do?

SOLUTIONS
Victor Sr. had a better idea. He hired a consulting firm that specialized in family transitions. Gerald Scibelli (now with A.D.P.), a principal in the consulting firm, took over. Interviews with each person and each family involved were conducted. The first major task was to work with all parties to differentiate between family business and business business. All parties were coached until it was easy to work on business at a business meeting and family matters at family meetings. There was a lot of self-discovery and subsequent changing involved.

Family members were coached to keep spouses and other relatives out of the business decisions, to not listen to spouses (and for spouses to not interfere with non-family decisions), to not fight in front of the staff, to not fight in front of the kids, and to never, never, never hire a relative unless they go through the standard hiring process. These were the critical first step.

Next, everyone concerned in the management process underwent tests and evaluations to determine where they best fitted in the business, and suggestions were made for additional education and training. Bob Cagnazzi, current president, was sent to a special program at Hofstra University where he met 4 brothers from another business and saw the transition process in action. Victor Jr. turned out to be terrific at sales, and took over that job. Other family members took other courses and ended up in other positions of authority.

It took close to a year for the completion of the analysis and the transition, but the results were terrific. Both the mother and the sister were involved in the all of the issues, but decided to not be involved in the business operations.

If you really want to succeed at transitioning your business to your children, take a leaf from the Cagnazzi book and hire a firm specializing in transition. The results shown by the Cagnazzis should be a beacon for your decision. Don’t be one of the 70% generation who fail or the 90% who fail in the next generation. Do something!