Transferring Management in a Family-Owned Business

INTRODUCTION

The family business is a vital force in the American
economy. About 90 percent of all U.S. businesses are
family owned or controlled. They range in size from
the traditional small business to a third of the
Fortune 500 firms. It is estimated that family busi-
nesses generate about half of the country’s Gross
National Product and half of the total wages paid.

The American economy depends heavily on the conti-
nuity and success of the family business. It is un-
fortunate, even alarming, that such a vital force
has such a poor survival rate. Less than one third
of family businesses survive the transition from
first to second generation ownership. Of those
that do, about half do not survive the transition
from second to third generation ownership.

At any given time, 40 percent of U.S. businesses
are facing the transfer of ownership issue. Foun-
ders are trying to decide what to do with their
businesses; however, the options are few. The fol-
lowing is a list of options to consider:

– Close the doors.
– Sell to an outsider or employee.
– Retain ownership but hire outside
management.
– Retain family ownership and management
control.

To be one of the few family businesses that sur-
vive transfer of ownership requires a good under-
standing of your business and your family. There
are four basic reasons why family firms fail to
transfer the business from generation to genera-
tion successfully:

– Lack of viability of the business.
– Lack of planning.
– Little desire on the owner’s part to
transfer the firm.
– Reluctance of offspring to join the firm.

These factors, alone or in combination, make trans-
ferring a family business difficult, if not impos-
sible. The primary cause for failure, however, is
the lack of planning. With the right plans in
place, the business, in most cases, will remain
healthy. There are four plans that make up the
transition process. By implementing these plans,
you will virtually ensure the successful transfer
of your business within the family hierarchy.

A brief explanation of each plan follows.

– A strategic plan for the business will allow
each generation an opportunity to chart a
course for the firm. Setting business goals
as a family will ensure that everyone has a
clear picture of the company’s future.

– The family strategic plan is needed to main-
tain a healthy, viable business. This plan
establishes policies for the family’s role in
the business. For example, it may include an
entry and exit policy that outlines the cri-
teria for working in the business. It should
include the creed or mission statement that
spells out your family’s values and basic
policies for the business. The family stra-
tegic plan will address other issues that are
important to your family. By implementing this
plan, you may avoid later conflicts about com-
pensation, sibling rivalry, ownership and man-
agement control.

– A succession plan will ease the founding or cur-
rent generation’s concerns about transferring
the firm. It outlines how succession will occur
and how to know when the successor is ready.
Many founders do not want to let go of the com-
pany because they are afraid the successors are
not prepared, or they are afraid to be without
a job. Often, heirs sense this reluctance and
plan an alternative career. If, however, the
heirs see a plan in place that outlines the suc-
cession process, they may be more apt to con-
tinue in the family business.

– An estate plan is critical for the family and
the business. Without it, you will pay higher
estate taxes than necessary. Taking the time
to develop an estate plan ensures that your
estate goes primarily to your heirs rather
than to taxes.

For business owners who do little planning, the
idea of preparing four plans may seem overwhelm-
ing. Although it is not easy, the commitment made
by all family members during the planning process
is the key ingredient for business continuity and
success. The first rule for successfully operating
and transferring the family firm is: Share infor-
mation with all family members, active and non-
active. By doing this, you will eliminate problems
that arise when decisions are made and implemented
without the knowledge and counsel of all family
members.

This publication will help you plan for a success-
ful transfer of ownership and avoid many of the
problems family businesses face when transfer of
ownership occurs. The appendixes include aids to
help you implement the process.

UNDERSTANDING THE FAMILY BUSINESS

This section will explore the nature of the family
business as a dual operating system, and will iden-
tify issues of greatest concern to family business
owners, as identified by family business owners
across the United States. As you review these is-
sues, you will see that, although you and your
family are unique, the challenges you face are not,
because almost every family business shares the
same problems.

Also, perspectives of the individuals involved in
a family business will be presented. We tend to
confuse personality with perspective–understand-
ing the viewpoints of the different actors invol-
ved in the family business (active and nonactive)
can help alleviate conflicts that may arise.

After reading this section, you and your family
should complete the Family Business Assessment
Inventory in Appendix A.

What Is a Family Business?

Defined simply, a family business is any busi-
ness in which a majority of the ownership or
control lies within a family, and in which two
or more family members are directly involved.
It is also a complex, dual system consisting of
the family and the business; family members in-
volved in the business are part of a task system
(the business) and part of a family system. As
you can see in Figure 1, these two systems over-
lap. This is where conflict may occur because
each system has its own rules, roles and require-
ments. For example, the family system is an emo-
tional one, stressing relationships and rewarding
loyalty with love and with care. Entry into this
system is by birth, and membership is permanent.
The role you have in the family–husband/father,
wife/mother, child/brother/sister–carries with
it certain responsibilities and expectations. In
addition, families have their own style of com-
municating and resolving conflicts, which they
have spent years perfecting. These styles may
be good for family situations but may not be
the best ways to resolve business conflicts.

Conversely, the business system is unemotional
and contractually based. Entry is based on ex-
perience, expertise and potential. Membership
is contingent upon performance, and performance
is rewarded materially. Like the family system,
roles in the business, such as president, mana-
ger, employee and stockholder/owner, carry spe-
cific responsibilities and expectations. And
like the home environment, businesses have their
own communication, conflict resolution and
decision-making styles.

Conflicts arise when roles assumed in one system
intrude on roles in the other, when communication
patterns used in one system are used in the other
or when there are conflicts of interest between
the two systems. For example, a conflict may arise
between parent and child, between siblings or be-
tween a husband and wife when roles assumed in the
business system carry over to the family system.
The boss and employee roles a husband and wife
might assume at work most likely will not be ap-
propriate as at-home roles. Alternatively, a role
assumed in the family may not work well in the
business. For instance, offspring who are the
peace makers at home may find themselves medi-
ating management conflicts between family mem-
bers whether or not they have the desire or qua-
lifications to do so.

A special case of role carryover may occur when
an individual is continually cast in a particu-
lar role. This happens primarily to children.
Everyone grows up with a label: the good one,
the black sheep, the smart one. While a person
may outgrow a label, the family often perceives
that person as still carrying the attribute.
This perception may affect the way that person
operates in the business.

Family communication patterns don’t always af-
fect the business, but when they do it can be
very embarrassing. Often you say things to fam-
ily members in a way you would never speak to
other employees or managers. This problem is
compounded when your communication is misread
by the family member. Often parents are sur-
prised by a son’s or daughter’s negative re-
action to a business directive or performance
evaluation. This reaction is probably because
the individual perceived the instructions or
evaluation as orders or criticism from Dad or
Mom, not from the boss.

System overlap is apparent when conflicts of in-
terest arise between the family and the business.
Some families put personal concerns before busi-
ness concerns instead of trying to achieve a bal-
ance between the two. It is important to under-
stand that the family’s strong emotional attach-
ments and overriding sense of loyalty to each
other create unique management situations. For
example, solving a family problem, such as giving
an unemployable or incompetent relative a position
in the firm, ignores the company’s personnel needs
but meets the needs of family loyalty.

Another example of conflict of interest occurs
when business owners feel that giving children
equal salaries is fair. Siblings who have more
responsibility but receive the same pay as those
with less responsibility usually resent it. In
cases of sibling rivalry, it isn’t unusual for
one sibling to withhold information from another
or try to engage in power plays, i.e., behaviors
that can be detrimental to the firm.

Much of this behavior can be eliminated or man-
aged by devising policies that meet the needs
of both the family and the business. Developing
these policies is part of the family strategic
planning process. Before discussing them, you
should make sure you have identified all the
issues that need to be addressed.

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Figure 1

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* *======* *
* Family *======* Business *
* System *======* System *
* *======* *
* *======* *
**************************************

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Issues in the Family Business

The list below contains the issues that most
family businesses face:

– Participation–who can participate in the
family business and under what circumstances.
– Leadership and ownership–how to prepare the
next generation to assume responsibility for
the business.
– Letting go–how to help the entrepreneur let
go of the family business.
– Liquidity and estate taxes.
– Attracting and retaining nonfamily executives.
– Compensation of family members–equality
versus merit.
– Successors–who chooses and how to choose
among multiple successors.
– Strengthening family harmony.

All of these issues and the others you include in
the Family Business Assessment Inventory can po-
tentially cause business conflict and family
stress. But there are three steps you can take to
manage conflict and stress in a family business:

Identify issues that may cause conflict and
stress. Discuss these issues with the family.
Devise a policy to address them.

A discussion of policy making, as well as estab-
lishing a forum conducive to it, will be address-
ed later, in the section Family Retreat.

Who Are the Actors?

The next consideration in understanding the family
business is to understand the perspectives of
those involved. Without this understanding, mana-
ging a family business will be difficult.

The actors in the family business can be divided
into two groups: (1) family members and (2) non-
family members. Each group has its own perspec-
tive and set of concerns and is capable of exert-
ing pressures within the family and the firm.

Family Members

Neither an Employee nor an Owner

Children and in-laws are usually in this group.
Although they may not be part of the business
operations, they can exert pressure within the
family that affects the business. For example,
children may resent the time a parent spends in
the business. This creates a problem because
parents usually develop guilt feelings as a re-
sult of their neglect and the resentment express-
ed by the children. In-laws, on the other hand,
are viewed either as outsiders and intruders or
as allies and therefore are usually ignored or
misunderstood. For example, a daughter-in-law is
usually expected to support her husband’s efforts
in the business without a clear understanding of
family or business dynamics. She may contribute
to family problems or find herself in the middle
of a family struggle. The son-in-law faces simi-
lar, if not worse, problems. He may be placed in
a competitive situation with his wife’s brothers.
If he isn’t involved in the family business, he
can still exert pressure on the business in his
role as his wife’s confidant.

An Employee but not an Owner

This family member works in the business but does
not have an ownership position. For this individ-
ual, conflict may arise for a number of reasons.
For example, if he or she compares himself or her-
self to the family member who has an ownership po-
sition but isnot an employee, a sense of inequity
may result. The member may voice his or her resent-
ment: I’m doing all the work, and they just sit
back and get all the profits. Or resentment may oc-
cur when decisions are made by owners alone. Here,
he or she may feel: I’m working here every day. I
know how decisions are going to affect the com-
pany. Why didn’t they ask me? Family members em-
ployed in or associated with a family business
generally expect to be treated differently from
nonfamily employees.

An Employee and an Owner

This individual may have the most difficult posi-
tion. He or she must effectively handle all the
actors in both systems. As an owner, he or she is
responsible for the well-being and continuance of
the business, as well as the daily business opera-
tions. He or she must deal with the concerns of
both family and nonfamily employees. Often, the
founder, as the sole owner and chief executive,
falls in this category.

Not an Employee but an Owner

This group usually consists of siblings and re-
tired relatives. Their major concern usually is
the income provided by the business; thus, any-
thing that threatens their security may cause
conflict. For example, if the managing owners
want to pursue a growth strategy that will con-
sume cash and has an element of risk, they may
face resistance from retired relatives who are
concerned primarily about dividend payments.

Nonfamily Members

An Employee but not an Owner

This group deals with the issues of nepotism and
coalition building and the effects of family con-
flicts on daily operations. Owners’ concerns for
nonowner employees usually involve recruiting and
motivating nonfamily employees and nonfamily
owner-managers who will have little or no oppor-
tunity for advancement, accepting children of non-
family managers into the business and minimizing
political moves that support family members over
nonowner employees.

An Employee and an Owner

With the emergence of stock-option plans, this
group has become more important. Employees may
become owners during a succession. In companies
where a successor has been chosen, partial owner-
ship of the company by its employees can foster
cooperation with the new management because the
employees will personally share the benefits and
responsibilities of the company. In cases where
there is no successor, selling the company to the
employees who have helped build it makes good
business sense. Employees who own the company
will want to be treated like owners, which may be
difficult for family members to understand and ac-
cept. A thorough understanding of the behavioral
consequences of an employee stock ownership pro-
gram (ESOP) should be grasped before a family im-
plements such a program. Understanding the per-
spective of the individuals around you, both fam-
ily and nonfamily, will make communicating and de-
cision making easier.

BALANCING FAMILY AND BUSINESS GOALS

When conflict occurs in the family business, it
can be traced to a disparity in the goals of the
individuals, the family or the business. Perhaps
a family member works in the business out of eco-
nomic necessity, not because he or she wants to.
Or perhaps the potential successor has plans for
the business that differ from current management
plans–different generations usually have differ-
ent goals. Whatever the cause, the conflict must
be addressed and resolved to avoid and prevent
more serious problems later.

One way to define and align family and business
goals is through business and family strategic
planning. In these plans, you will create a mis-
sion statement for the business and for the family
that allows each element to complement the other.
Once you have completed this task, set goals for
the family business that will allow the family
and business to prosper. Next, develop a strategy
to accomplish these goals and, finally, formulate
policies and procedures that control the family’s
involvement in the business. Appendix B, the Stra-
tegic Plan Checklist, can help you review the
steps in strategic planning.

Business Strategic Planning

Strategic planning for family-owned businesses re-
quires that you integrate family issues, such as:

– 1. What are the long-term personal and profes-
sional goals of family members?
– 2. What is the family mission? Why are you com-
mitted to establishing and operating the
business?
– 3. How do you envision the firm in the future?
– 4. Will family members be active in management
or will they be passive members?
– 5. How will issues such as compensation, bene-
fits and performance evaluation be handled?

The answers to these questions will affect the
business strategy and should be resolved before
strategic planning begins.

Strategic planning involves analyzing the business
in its environment and devising a process for guid-
ing its development and success in the future. This
process involves assessing the internal operations
and the current external environment (i.e., econom-
ic, technological, social and political forces)
that affect the business. To begin this process,
identify internal strengths and weaknesses that
may constrain or support a strategy. Components of
this assessment include (1) the organizational
structure, (2) the culture and (3) the resources.
Make a list of the opportunities available (growth,
new markets, a change in regulations) and the
threats (increased competition, shortage of raw
materials, price cutting) to your business. This
should give you some insight into the current sit-
uation and provide a strategic direction.

Next, list the objectives of you and your family,
identifying personal needs and risk orientation.
Many of these objectives and goals will be address-
ed in your family strategic plan. Also, you will
find that your personal objectives will affect the
strategy you choose. For example, if there is a
great opportunity for growth in your market but
you have a low risk orientation and a high per-
sonal need for security, you probably should not
pursue high growth. It would be not only risky but
also expensive. Growth consumes cash, and cash
must be generated internally or financed external-
ly. Your personal objectives should mesh with your
strategy.

Once you have identified opportunities in the in-
dustry, assessed the strengths and weaknesses of
the firm and listed your personal objectives, you
can proceed with the strategic plan. This will
involve

– developing a mission statement,
– setting objectives,
– developing strategies to meet objectives, and
– developing action steps to implement the
strategy.

Mission Statement

The mission statement answers the question “What
business are you in?” It defines your customers
and explains why you are in business. The mission
statement embodies the heart of the business and
gives direction to every facet of the business.
Effective mission statements

– include specifications that allow measurement,
– establish the individuality of the firm,
– define the business in which the firm wants
to be involved,
– are relevant to all with a stake in the firm,
and
– are exciting and inspiring.

Objectives

You should set reasonable objectives for the firm,
based on the mission statement, to ensure accom-
plishment of the firm’s mission. Objectives should
be clearly stated, realistic, measurable, time spe-
cific and challenging. Objectives can be created
for

– revenue growth,
– earnings growth,
– sales and market share growth,
– new plants or stores, and
– product/service quality or corporate image.

Strategies

Strategies are determined by your answer to the
earlier question: “What will the firm be like in
the future?” Your strategic options include the
following:

– Stability–success is derived from little
change (rare).
– Profit strategy–sacrifice future growth for
profits today.
– Growth strategy–growth may be achieved through
vertical integration (expansion from within),
horizontal integration (buy a competitor), di-
versification, merger or retrenchment (turn-
around or divestment).

Action Steps

Once the strategy is selected, action steps should
be specified that will guide the firm’s daily ac-
tivities. An example of an action step is creating
a budget to project the costs of a strategy. This
process also is known as tactical planning. The
steps in tactical planning should be practical and
easy to implement and account for; their purpose
is to convert goals into manageable, realistic
steps that can be individually implemented.

Family Strategic Planning

The entire family should develop a mission state-
ment or creed that defines why it is committed to
the business. By sharing priorities, strengths and
weaknesses, and the contribution each member can
make to the business, the family will begin to cre-
ate a unified vision of the firm. This vision will
include personal goals and career objectives.

An important issue to consider is how to set pri-
orities for the family and the business, i.e., de-
cide which will come first, the family or the busi-
ness. How you answer this question will influence
your planning. Some family members will opt for
the business first, reasoning that, without a busi-
ness, there will be no financial security for the
family. Others will opt for the family first,
reasoning that no business is worth the loss of
family harmony. A third alternative is to serve
both family and business perhaps not equally, but
as fairly as possible. Under this alternative, all
decisions are made to satisfy both family and busi-
ness objectives. For example, a family may have a
policy that any family member may join the busi-
ness, but he or she must meet the requirements of
the job. You may find this is the best alternative
because it forces a commitment to both the family
and the business.

The Family Retreat

Trying to plan a business strategy during normal
office hours is almost impossible. Plan a family
business retreat to discuss the goals of the in-
dividual family members and the goals of the busi-
ness. The first retreat should focus on reviewing
the firm’s history, defining family and business
values and missions, creating a statement about
the future of the business and reviewing areas
that need more attention.

The purpose of the retreat is to provide a forum
for introspection, problem solving and policy mak-
ing. For some participants this will be their
first opportunity to talk about their concerns in
a nonconfrontational atmosphere. It is also a time
to celebrate the family and enhance its inner
strength.

A retreat usually lasts two days and is held far
enough away so you won’t be disturbed or tempted
to go to the office. Every member of the family,
including in-laws, should be invited. Begin plan-
ning your retreat about six weeks in advance.

Once you have picked a time and place, establish
a tentative agenda. The agenda in Table 1 is typi-
cal.

***************************************************
* Table 1 Agenda for Family Retreat *
*Day 1 *
* 8:00-10:00 Review family business history and *
* current operations. *
*10:00-12:00 Discuss individual career goals *
* and assess individual roles in *
* the business. *
* 1:00-3:00 Discuss future plans of the com- *
* pany and how family members fit in. *
* 3:30-5:00 Prepare written statements of the *
* family and business mission state- *
* ments and goals. *
* *
*Day 2 *
* 8:00-10:00 Discuss areas in which policies need*
* to be drafted (e.g. entry exit com- *
* pensation). *
*10:00-11:30 Prepare a preliminary draft of poli-*
* cies. *
* 1:00-3:00 Discuss areas in which better com- *
* munications are needed. What methods*
* are needed to keep everyone (includ-*
* ing nonoperating family members) in-*
* formed? *
* 3:30-5:00 Review retreat and plan for next *
* meeting. *
***************************************************

Your actual agenda will be tailored to meet the
unique needs of your family and business. Usually
families will identify some of the following is-
sues for discussion at their first retreat:

– A family creed or mission statement.
– Management succession.
– Estate planning.
– Strategic business planning.
– The reward system.
– Performance evaluation.
– Communication within the family.
– Preparing adult children to enter the business.
– Transition timing.
– Exit and entry policies.

A series of questions that can be used to identify
topics for discussion is included in Appendix C.

You may consider using a retreat facilitator, a
professional experienced in helping family-owned
businesses. The facilitator helps identify issues
for discussion before the retreat and keeps the
atmosphere nonconfrontational during the retreat.
The facilitator does not solve the family’s prob-
lems but guides the family in doing so.

The retreat is the beginning of a process. When a
consensus is reached by the participants, policies
should be set, courses of action planned and re-
sponsibility for implementation assigned. When
agreement cannot be reached, further discussions
should be planned, possibly with the continued as-
sistance of the facilitator.

One important outcome of the retreat should be
plans for periodic family meetings and retreats
in the future, so the dialogue will continue.
Open communications will enable the family to
come to grips with problems and issues while
they are fairly easy to solve. Once family mem-
bers have reached a consensus on the continuity
of the firm and their roles in it, you can begin
planning for succession.

CHOOSING A SUCCESSOR

Succession is the transferring of leadership to
the next generation. It is a process rather than
an event. While there is a time frame within
which the transition will occur, the actual amount
of time taken for the process is arbitrary. It
will depend on you, your family and the type of
business you are in. This is a difficult process
for most family businesses. The failure to face
and plan for succession has been termed the “suc-
cession conspiracy” by Ivan Landsberg (1988). He
cites a number of forces that act against succes-
sion planning:

– Founder
– Fear of death.
– Reluctance to let go of power and control.
– Personal loss of identity.
– Fear of losing work activity.
– Feelings of jealousy and rivalry toward
successor.
– Family
– Founder’s spouse’s reluctance to let go of
role in firm.
– Norms against discussing family’s future
beyond lifetime of parents.
– Norms against “favoring” siblings.
– Fear of parental death.
– Employees
– Reluctance to let go of personal relation-
ship with founder.
– Fears of differentiating among key managers.
– Reluctance to establish formal controls.
– Fear of change
– Environmental
– Founder’s colleagues and friends continue
to work.
– Dependence of clients on founder.
– Cultural values that discourage succession
planning.

Overcoming the forces against succession planning
requires the commitment of the family and employ-
ees of the business.

Succession occurs in four phases: initiation, se-
lection, education and transition. A discussion
of each phase follows.

Initiation

The initiation phase is that period of time when
the children learn about the family business. It
occurs from the time the children are born. A
child can receive either a positive or a negative
impression of the family business. If parents
bring home the negative aspects of the business,
complaining about it and about employees and rel-
atives, the children will view the business in a
very poor light. Other ways to destroy children’s
interest in the business is to be secretive about
it or to convey an unwelcome or a hands-off atti-
tude. There are families in which children are
welcome to join the family business, but no one
has told them so.

Owners are often cautious about systematically
conditioning their children to enter the family
business, an attitude that stems primarily from
their awareness of individual differences and
their belief that their children should be free
to select a career path. If you do want your
children to enter the business, or at least have
that as a career alternative, there are some
steps you can take to initiate them into the
firm. The first step in motivating your children
is to be certain that is what you want. Your
lack of conviction about their involvement will
be communicated to them. This may be interpreted
as doubt about their ability, about the viability
of the business or about the potential of the
parent-child relationship to survive the strain
of succession. Any of these situations can cause
your child to lose interest in the business.

Assuming your children know that you want them to
enter the business, you should talk with them of-
ten and openly about it. Be realistic, but stress
the positive aspects. Your business provides you
with many positive experiences to share with your
children. Your children should learn what values
the business represents, what the business culture
represents and where the business is headed.

Selection

Selection is the process of choosing who will be
the firm’s leader in the next generation. Of the
entire transition process, this can be the most
difficult step, especially if you must choose
among a number of children. Selecting a successor
may be viewed by siblings as favoring one child
over the others, a perception that can be disas-
trous to family well-being and sibling harmony.
Owners select successors on the basis of age,
sex, qualifications or performance. Because of
the potential for emotional upheaval, some own-
ers avoid the issue entirely, adopting an atti-
tude of “Let them figure it out when I’m gone.”

Nevertheless, there are several solutions to this
dilemma. Assuming you have more than one child
who is or can become qualified for the position
of president, you can select your successor based
on age. For example, the oldest child becomes the
successor. Unfortunately, the oldest may not be
the best qualified. Placing age or sex restric-
tions on succession is not a good idea.

Alternatively, you could have a “horse race.” Let
the candidates fight it out, and the “best person”
wins. While this is the style in some major cor-
porations, it is not the best option for all
family businesses.

Family business owners may want to take advantage
of a successor selection model developed for cor-
porate executive succession. In this model, fam-
ily members, using the strategic business plan,
develop specific company objectives and goals for
the future president or chief executive officer.
The job description includes the requirements for
the position–such as skills, experience and pos-
sibly personality attributes. For example, if a
firm plans to pursue growth in the next five
years, the potential successor would be required
to have a thorough understanding of business valu-
ations and financial statements, the ability to
negotiate and a good relationship with local fi-
nancial institutions.

Designing such job descriptions provides a number
of benefits. First, it removes the emotional as-
pect from successor selection. If necessary, the
successor can acquire any special training the
job description outlines. Second, it provides the
business with a set of future goals and objectives
that have been developed by the whole family. Fi-
nally, the founder may feel more comfortable know-
ing objectives are in place that will ensure a
growing, healthy business.

If you have an outside board of directors, you may
want to solicit their input regarding successor
selection. The form in Appendix D will help assess
the potential successors in your company.

Education

Training or educating the successor in the firm is
a delicate process. Many times a parent finds it
difficult to train a child to be successor. If so,
an alternative trainer may be found within the
firm. A successful trainer will be logical, com-
mitted to the task, credible and action oriented.
These attributes, when tied into a program that is
mission aligned, results oriented, reality-driven,
learner centered and risk sensitive, will produce
a well-trained beneficiary. All of this, of course,
is easier stated than accomplished.

A training variant of the management by objectives
(MBO) concept is the training by objectives (TBO)
concept. This concept can be an effective method
for providing both the training for and the evalu-
tion of successors. In the TBO process, both the
trainer (you or a nonfamily manager) and the train-
ee (potential successor) work together to define
what the trainee will do, the time period for ac-
tion and the evaluation process to be used. This
system allows the successor to be placed in a use-
ful, responsible position with well-delineated ob-
jectives. It also provides for steps of increased
responsibility as goals are met and new, more rig-
orous goals are established. It is important that
the successor enter the firm in a well-defined po-
sition. Instead of entering the company as “assis-
tant to the president,” which requires that he or
she follow the president around all day, the suc-
cessor (or any other child) should enter with a
specific job description. In a small business this
is very difficult because everyone is usually re-
sponsible for all tasks. Nevertheless, the succes-
sor cannot be evaluated effectively if he or she
is not given responsibility and authority for cer-
tain tasks.

Your business will enable you to determine which
criteria are necessary for good training. Usually,
an owner wants to assess a successor in the fol-
lowing areas:

– Decision-making process.
– Leadership abilities.
– Risk orientation.
– Interpersonal skills.
– Temperament under stress.

An excellent way to assess these skills is to let
the successor give his or her insight on a current
problem or situation. This is not a test and
should not be confrontational. Instead, solicit
advice and try to determine the thinking process
that is generating your successor’s suggestions.
For example, you may be faced with a pricing de-
cision. Give the successor all the information
needed to determine whether or not to raise
prices, then sit back and listen. Ask questions
when appropriate–these should be “Why?” and “What
if?” After the successor is finished, say “I was
considering. . . .” This way each of you can learn
how the other thinks and makes decisions.

It is possible that your leadership style differs
from that of your successor. Your employees are
used to your style. If your successor’s style is
very autocratic and uncaring, your company is
going to experience problems.

Potential successors should be introduced into
your outside network (e.g., customers, bankers
and business associates), something many mana-
gers neglect. This will give everyone time to
get to know your successor and allow the suc-
cessor to work with business associates and
bankers, and to get acquainted with customers.

Transition

The actual transfer of control to the successor
occurs when you retire. Research indicates that
transitions are smoothest when

– They are timely.
– They are final and do not include the entre-
preneur’s participation in daily activities.
– The entrepreneur is publicly committed to an
orderly succession plan.
– The entrepreneur has articulated and super-
vised the formulation of company principles
regarding management accountability, poli-
cies, objectives and strategies.

The transition can be effected gradually by re-
linquishing more and more responsibility to the
successor. One expert advises the entrepreneur
to take a number of planned absences before ac-
tually relinquishing control. Let the successor
see what it is like to manage the business alone.
Also, this allows you to see that the business
is not going to fall apart without you.

Once you announce your retirement date, do not
rescind it. There is no such thing as semiretire-
ment. By the time your children are in their 40s,
they expect leadership roles in the firm. If you
refuse to let go, they may leave.

Letting Go

There are many reasons why entrepreneurs cannot
let go of the family business. Primary among
these are financial ones. As a business owner,
you may be used to a large salary and benefits,
such as a car or insurance. After working hard
in the business most of your life, you want your
retirement years to be comfortable, not filled
with financial anxieties. There are several ways
to ensure your financial security after retire-
ment. Business owners usually consider either
taking what they need from the company after
they retire or arranging a buy-out that will
give them the needed liquidity without placing
an undue financial burden on the company. If
you don’t sell the company and your financial
security is contingent on its daily operations,
you will be less likely to retire completely.
Your successor needs full control, and you prob-
ably won’t let that happen. Also, the company
may not be able to support you and the successor
and still pursue the strategy you have set for it.
Finally, you may not be able to meet your finan-
cial goals from income generated by the company.

To avoid these problems, consult with a financial
planner or an attorney to determine the method of
transfer that is best for you. There are tax con-
sequences to the outright sale of the business to
your children. Also, an outright sale may burden
the company with too much debt. Other alternatives
include an installment sale or private annuity, or
funding a buy-sell with insurance proceeds. To pro-
vide effectively for your retirement, seek profes-
sional assistance in this area.

There are other reasons why the entrepreneur
doesn’t want to let go. One of the primary rea-
sons is the fear of retirement. To understand
this fear, it is necessary to appreciate the
relationship between work, the meaning of life
and social evaluation. For many founders, work
and the business are synonymous with a meaning-
ful life. The intense involvement the entrepre-
neur has with the business increases the impor-
tance of the job and his or her identity. Remo-
val from work is like losing a part of oneself.
Work is important to the entrepreneur because
it provides

– Economic returns.
– Opportunities to contribute to society.
– Status and self-respect.
– Social interaction.
– Personal identity.
– Structured time.
– Escape from loneliness and isolation.
– Personal achievement.

That’s a lot to ask someone to give up. Especial-
ly important is the loss of status and social
power. The leader of a firm wields a great deal
of influence and enjoys public impact and public
exposure. Retirement means giving up this power.
Because this loss is unpleasant, it is not uncom-
mon for a founder to give a successor the respon-
sibility for running a firm and still try to re-
tain power and privileges from a position on the
board of directors.

The entrepreneur who successfully lets go has

(1) a sound financial plan for retirement,
(2) activities outside the business that can
provide social contact and power,
(3) confidence in the successor and
(4) a willingness to listen to outside advisors.

Board of Directors

Most small businesses do not have a board of di-
rectors, but a board can be invaluable during
the succession process. A board can help manage-
ment determine objectives and strategies, provide
specialized expertise and even arbitrate feuds
among family members.

The board is usually composed of both insiders
and outsiders. Although family businesses us-
ually are operated in a very private manner,
there are benefits to making outsiders board
members. They come with different backgrounds
and perspectives, and provide checks and bal-
ances. Outside directors don’t work out well
if they lack knowledge about the firm and its
environment, or if they are uncommitted to
board responsibilities.

If you decide to develop a board, you should be
totally committed to the process. There are dif-
ficulties associated with boards (time and money)
and the entrepreneur must be willing to make the
board a viable entity.

The first step would be to establish goals and
objectives for the board. You should set these
objectives before you recruit or make a commit-
ment to any members. Boards can expand your net-
work, provide input into the succession process,
judge the successor’s progress or help determine
a transition date. But boards should not get
overly involved in operational or day-to-day is-
sues.

The second step is recruiting. A board should
have five to seven members, including three or
four outsiders. Select them carefully. You can
find them in civic and charitable organizations,
among acquaintances and at local universities.
You should know and have a good rapport with
prospective members, and you should determine
their ability to provide concrete advice and di-
rection for the business. The following are a
few good questions to ask:

– What is their background?
– How are they thought of in the community?
– What do your present directors think of them?

Make sure they have the qualifications to help
realize the goals and objectives you have set.
The remainder of the board is composed of top
insiders. Your potential successor may be invi-
ted to attend the meetings, or you may choose
to make him or her a member of the board.

If you decide to develop a board, or if you feel
you need to know more, you will find Outside Di-
rectors in the Family Owned Business to be an
excellent reference on the topic. It is listed
in the reference section.

Making Succession Work

To make succession work, you must communicate.
This is the key ingredient. Use the family re-
treat as well as family meetings. Family meet-
ings can educate the family in discussions about
the nature of the firm, the kinds of leadership
skills needed, entry and exit conditions,
decision-making policies and conflict resolution
procedures. Casual conversations about these is-
sues can contribute to your formal planning
later on.

Family meetings do not have to be formal affairs,
but they should occur regularly and have an
agenda. Parents don’t have to lead the meeting;
have the offspring organize and conduct a portion
of the meeting. Use the meetings to defuse any
potential time bombs.

Anticipate problems. Will there be any problems
with nonfamily members? If so, which ones? How
will they be a problem, and what can you do
(short of firing them) to handle it?

Sibling rivalry is another problem to consider.
Does it exist? If so, how will you resolve it?
It may not be a problem until the successor is
named. Develop a code of conduct for sibling
relations. This code will outline how siblings
must act toward each other (i.e., in a way con-
ducive to a healthy business), including how to
work together, how to play together and how to
keep spouses informed about what’s going on. An-
ticipate problems that may arise and meet them
head on.

Summary

Succession is a process that may extend from
three to six years or longer depending on your
age and on your successor’s age. It occurs in
phases. Over a period of time, you initiate or
educate your children to the family business.
After determining a successor, you develop a
plan to transfer leadership in the family busi-
ness. The decision to announce who the successor
is and when the transition will occur depends on
the family.

There are benefits to making an early announce-
ment, including (1) reassuring employees, sup-
pliers and customers, (2) allowing siblings time
to adjust to the decision and to make alternative
career decisions, if necessary, and (3) enabling
the entrepreneur to plan for retirement.

The fundamental goal should be to pass the family
business successfully to the next generation. To
do this you must feel financially secure, secure
with the company’s future goals and plans and
secure with your successor.

ESTATE PLANNING

The last plan to consider is your estate plan. In
the family business, the bulk of your assets are
usually tied up in the business. You need an attor-
ney who understands family business and the laws
concerning transferring business assets across gen-
erations. While the following information is not a
substitute for advice from legal counsel, it may
help you in planning your estate.

The 1990 income tax law revived the recapitaliza-
tion technique known as estate freeze, which had
been eliminated. This technique allows the owners
of a business to reduce their estate taxes by
freezing the value of the business at a particu-
lar point in time. Estate taxes are reduced be-
cause the majority of the stock of the business
will not appreciate over time.

The owners do this by creating preferred stock
that enables them to retain operating control of
the business while transferring common stock to
their children. Unlike common stock, preferred
stock will not appreciate over time. However,
when preferred stock is transferred to the child-
ren, they will pay estate taxes in the form of
gift taxes. It is highly recommended that you con-
sult legal counsel concerning this matter because
tax laws are constantly changing.

Transfer Tax Deferral Techniques

This first set of techniques includes the will,
living trust, marital deduction trust and install-
ment payment.

The last will and testament is a legal declara-
tion of your desires or wishes regarding the
disposition of your probate estate. It is the
basic element of most estate plans. If you have
not prepared your own will, your state of resi-
dence has prepared one for you through its laws
and regulations.

The living trust is a completely changeable agree-
ment between its creator (donor) and its property
manager (trustee) established for the benefit of
a recipient (beneficiary). It is created while the
donor is alive to hold assets for the donor’s use
until death and for use in transferring property
outside of the donor’s will (as part of the do-
nor’s nonprobate estate) upon the donor’s death.
It is particularly useful in managing the donor’s
property during a long term disability.

The marital deduction trust is created in your
will or in your living trust for the benefit of
your spouse after your death. The minimum bene-
fit your surviving spouse can receive is the man-
datory distribution of income from the trust prop-
erty. Your spouse’s rights to the trust principal
while you are alive can be limited by you as
stated in the trust agreement. Property placed in
a qualified marital deduction trust is not subject
to federal estate tax at your death. Instead, any
tax is assessed when your spouse dies. This type
of marital deduction trust is called a qualified
terminable interest property trust (QTIP Trust).
The disposition of the trust property, if any, re-
maining at your spouse’s death is determined by
you under the terms of the trust agreement, not
by your spouse’s will.

A fourth transfer tax deferral tool is the in-
stallment payment of the federal estate tax at-
tributable to the value of a family business.
Internal Revenue Code Section 6166 allows a 14-
year payout of the estate tax. To qualify, the
family business must be an active trade or busi-
ness, and your interest in the business must
have a value equal to at least 35 percent of
your estate. Qualification of the deferred pay-
out allows you to pay no federal estate tax on
the value of the family business for five years.
The federal estate tax, with annual interest, is
paid in equal annual payments over a ten-year
period beginning in the fifth year. However, a
sale by your heirs of 50 percent or more of your
interest in the family business during the payout
period will result in accelerating the estate tax
payment.

Transfer Tax Exclusion Techniques

A second set of tools available to the estate
planner are transfer tax exclusion techniques.
These include the unified credit/exemption
equivalent trust, the dynastic trust, the an-
nual exclusion gift, unified credit/exemption
equivalent gift and the statutory grantor re-
tained interest trust.

The unified credit/exemption equivalent trust
is created in your will or living trust for the
benefit of whomever you desire. It is funded
with the maximum amount of property you can
leave to beneficiaries other than your spouse
without the application of the federal estate
tax (generally $600,000). While you are free
to designate any trustee and beneficiary you
desire to provide for restrictive or expansive
trust terms, normally your surviving spouse or
children are the beneficiaries.

The dynastic trust is created in your will or
in a living trust. It is funded with the maxi-
mum amount of property you can leave to grand-
children or other third generation benefici-
aries without the application of the federal
generation-skipping transfer tax (generally
one million dollars).

The annual exclusion gift consists of gifts of
cash or other property of $10,000 or less per
recipient per year. These are free of federal
gift taxation. Such gifts, as well as their ap-
preciation in value and future income from them,
are also excluded from federal estate and gene-
ration-skipping transfer taxation.

The unified credit/exemption equivalent gift is
a gift of a future interest in property or of a
personal interest in excess of the annual exclu-
sion gift amount. This gift may be made in the
amount of $600,000 during your lifetime without
incurring federal gift taxation and will exclude
postgift appreciation and income of the property
from your estate for purposes of federal transfer
taxation. This tool is integrated with the unified
credit/exemption gift. This means the united cred-
it’s exclusion of $600,000 in property value is
allowed only once. You may, however, choose to
take it while you are living or at your death.

The statutory grantor retained interest trust is
a trust created while you are alive. It provides
for retaining an income interest in the property
transferred to the trust for a ten-year term. It
also provides a transfer, by you, of a remainder
of the interest in the trust property to a third
party at the end of the term. The value of your
gift for federal gift tax purposes is the value
of the remaining interest as determined by an IRS
table. If you survive the trust term, the entire
value of the trust property (including any appre-
ciation in the value of the property) is excluded
from your estate. If you die during the trust
term, the entire trust property, at its value on
the date of your death, is subject to federal
estate taxation. You, however, receive credit for
any gift tax paid or unified credit used in crea-
tion of the trust. But you may not be the trustee
of this trust.

Again, seek competent legal help when you begin
planning your estate. There are some aspects of
estate planning that you should consider. Many
times the bulk of the business owner’s estate is
the business assets. If you leave these assets
to your successor, other siblings may be left
out. If you divide them equally among siblings,
you deny control to your successor. Children
need to be treated fairly; therefore, it is im-
portant that you consider carefully all aspects
of estate planning.

SUMMARY

Transferring the family business requires the
family to make a determined effort to do the
following:

– Communicate.
– Create a business strategic plan, including
– Business mission.
– Business goals.
– Strategy to achieve goals.
– Create a family strategic plan, including a
– Unified vision of the family’s role in the
business.
– Code of conduct for family members.
– Joint operating policies that serve the
family and business.
– Family creed.
– Prepare a Financial Plan for Retirement.
– Prepare an Estate Plan.
– Prepare a Succession Plan, including
– Arranging for successor training.
– Setting a retirement date.
– Championing your successor.

There are many organizations, books and magazines
that can help you plan and manage a successful
family business. Refer to Appendix E: Information
Resources. Gather as much information and read as
many references as possible before you devise a
plan for managing and transferring the family
business. You will find that following the guide-
lines discussed in this publication will make the
process easier and more successful.

REFERENCES

Benson, B., E.T. Crego, and R.H. Drucker. Your
Family Business. Homewood, IL: Dow Jones-Irwin,
1990.
Bowman-Upton, N. Family Business Succession.
Waco, TX: Institute for Family Business,
Baylor University, 1987.
Danco, L.A. and D.J. Jonovic. Outside Directors
in the Family Owned Business. Cleveland, OH:
The University Press Inc., 1981.
Landsberg, I. The Succession Conspiracy, Family
Business Review. 1(1981): 119-144.
Ward, J.L. Keeping the Family Business Healthy.
San Francisco: Jossey-Bass Publishers, 1988.

APPENDIX A: FAMILY BUSINESS ASSESSMENT INVENTORY
Section I

Business issues YES NO

1. Have goals for sales and profits
been set? — —
2. Do we have a business plan? — —
3. Do we have a strategic plan? — —
4. Is the business in good financial
standing? — —
5. Do we have a compensation system? — —
6. Do we have a performance appraisal
system? — —
7. Do we have a board of directors? — —
8. Can we attract and retain non-
family managers? — —
9. Is the business in a highly
competitive industry? — —
10. Are we experiencing an increase
in sales? — —

Family business issues

1. Do family members know they are
welcome to join the firm? — —
2. Do we have policies for entry
into and exit from the firm? — —
3. Is a system in place to train
and develop the successor? — —
4. Do we have a succession plan? — —
5. Can family members in the firm
effectively communicate? — —
6. Do we have a system to resolve
conflict among family members? — —
7. Are women welcomed in the
business? — —
8. Is there a minimum amount of
sibling rivalry in the firm? — —
9. Is there a system in place
for choosing a successor? — —
10. Does the family agree on goals
for the business? — —

If you answered no to any item action should be
outlined and implemented to address and set
policies for that item.

Section II

The following items need to be discussed in the
family business:

– Leadership succession.
– Ownership transfer.
– Communication policies.
– Compensation policies.
– Rights and responsibilities of nonfamily
employees.
– Rights and responsibilities of in-laws.
– Creating change.
– Development of a management team.
– Long-term planning for the business.
– Obtaining financing.
– Financial equity among children.
– Resolving conflict.
– Hiring and firing practices.
– Sibling rivalry.
– Organizational relationships.
– Working with advisers.

This list should be distributed to every family
member. Responses should be compared and issues
of concern to family members identified. Un-
resolved issues should be discussed and polices
established to resolve them.

APPENDIX B: STRATEGIC PLAN CHECKLIST
YES NO

1. Have I listed the emerging oppor-
tunities in my industry? — —
2. Have I listed the environmental
threats to my firm? — —
3. Have I listed the internal
strengths of my firm? — —
4. Have I listed the internal
weaknesses of my firm? — —
5. Have my family and I listed our
personal goals and objectives? — —
6. Do I have a mission statement? — —
7. Have I listed goals (objectives)
for the firm? — —
8. Are the objectives for my firm
in line with my family’s
personal goals? — —
9. Are the objectives for my firm in
line with the analysis of my
firm’s strengths and weaknesses? — —
10. Have I written a strategy to meet
my objectives? — —
11. Are my actions
– manageable (one year or less)? — —
– accountable (someone is
responsible)? — —
– reasonable? — —

APPENDIX C: PRE-RETREAT PLANNING

Determine which questions would be most beneficial
to address at your retreat. Have everyone answer
these.

Personal Questions

1. Do you have a desire to be the successor in
the family business?
2. What are your reasons for wanting to be the
successor?
3. Have you signed a letter of commitment?
4. Do you intend to work outside the family
business?
5. Do you have the necessary education to
handle the job?
6. Are your values comparable to the founder’s
values?
7. What strengths do you have that can benefit
the organization?
8. Do you have a vision for the company?
9. Are you willing to make sacrifices (such as
your family time) for the business?
10. Is your choice to become successor your own,
or is it expected by the family?

Questions Dealing with the Family

1. What are the reasons for perpetuating the
family business?
2. Are you aware that the odds are not in
favor of the survival of the business?
3. What is the history of the family business?
4. How does the family get along?
5. Is anyone qualified to be the successor?
6. Who will choose the successor?
7. How will the successor be chosen?
8. At what age will potential successors be
allowed to work in the family business?
9. Is there a minimum education level re-
quired to become the successor?
10. Will there be a position in the family
business for all interested relatives?
11. Are there any special conditions for
entering the family business?
12. Who will determine salaries?
13. Will salaries be paid evenly across
the board or by performance?
14. Will a mentor be assigned?
15. Will the successor be accepted by
the family?
16. Is anyone in the family eligible to
become the successor?
17 .How will conflict among relatives be
resolved?
18. Will the successor start in an entry-
level or management position?
19. At approximately what age will the
successor take control?
20. Will a spouse be allowed to work in
the family business?
21. How long will the potential successor
remain in control?
22. Is there a procedure for filing
grievances in the business?
23. Is there a code of conduct?
24. Will all potential successors work at
the headquarters or at different divi-
sions?
25. Are the successor’s suggestions taken
seriously?

Questions Relating to the Business

1. In what stage of the industry life
cycle is the family business?
2. What is the company’s mission state-
ment?
3. Can the business support another
executive?
4. What are the company’s strengths
and weaknesses?
5. Who are the firm’s competitors?
6. Are there any barriers to entry?
7. What are the competitors’ strengths
and weaknesses?
8. What is the business’s current
market share?
9. Has the founder told employees the
business will stay in the family?
10. Do employees hear news directly or
through the grapevine?
11. How does the family business compare
with other companies in the same
industry?
12. Is there a manager in place capable
of running the business if something
should happen to the founder and the
successor is not ready?
13. Will current employees stay when the
power changes hands?
14. Are the company’s goals shared by
the employees?
15. Is the family business ahead or
behind technologically?
16. Does the interest of the family or
at the business come first?
17. Is the family willing to sacrifice
today to prosper later?
18. Will the employees accept the
successor?
19. Is the timing right to announce the
successor?
20. Is there fresh talent in senior
level positions?
21. Is there an established budget?
22. Is reinvesting in the family
business a priority?

APPENDIX D: ASSESSMENT OF CANDIDATES

Instructions: List below all of the potential suc-
cessors to you as principal owner.
For each quality, rate the candidate
on a scale of one to five, with five
very high and one very low.

NOTE: The chart’s columns and rows have been re-
versed for clarity on the BBS.

***************************************************************************
* * Name * Name * Name * Name * Name * Name * TOTAL *
* * * * * * * * *
***************************************************************************
* Related education * * * * * * * *
***************************************************************************
* Relevant experience * * * * * * * *
***************************************************************************
* Commitment to family * * * * * * * *
* and firm * * * * * * * *
***************************************************************************
* Management style * * * * * * * *
***************************************************************************
* Communication ability * * * * * * * *
***************************************************************************
* Financial stewardship * * * * * * * *
* for the family * * * * * * * *
***************************************************************************
* Creativity * * * * * * * *
***************************************************************************
* Guts and ambition * * * * * * * *
***************************************************************************
* Alignment with your * * * * * * * *
* values * * * * * * * *
***************************************************************************
* TOTAL * * * * * * * *
***************************************************************************

Meaning of totals: The total for each candidate is your
assessment of how capable he or she
would be as a successor. The total
column along the side indicates the
qualities in good supply in your
group and those that may be lacking.

APPENDIX E: INFORMATION RESOURCES

U.S. Small Business Administration (SBA)

The SBA offers an extensive selection of
information on most business management
topics, from how to start a business to
exporting your products.

This information is listed in The Small
Business Directory. For a free copy con-
tact your nearest SBA office.

SBA has offices throughout the country.
Consult the U.S. Government section in
your telephone directory for the office
nearest you. SBA offers a number of pro-
grams and services, including training
and educational programs, counseling
services, financial programs and con-
tract assistance. Ask about

– Service Corps of Retired Executives
(SCORE),a national organization spon-
sored by SBA of over 13,000 volunteer
business executives who provide free
counseling, workshops and seminars to
prospective and existing small busi-
ness people.

– Small Business Development Centers
(SBDCs),sponsored by the SBA in part-
nership with state and local govern-
ments, the educational community and
the private sector. They provide as-
sistance, counseling and training to
prospective and existing business
people.

– Small Business Institutes (SBIs), or-
ganized through SBA on more than 500
college campuses nationwide. The in-
stitutes provide counseling by stu-
dents and faculty to small business
clients.

For more information about SBA business
development programs and services call
the SBA Small Business Answer Desk at
1-800-8-ASK-SBA (827-5722).

Other U.S. Government Resources

Many publications on business management
and other related topics are available
from the Government Printing Office (GPO).
GPO bookstores are located in 24 major
cities and are listed in the Yellow Pages
under the bookstore heading. You can re-
quest a Subject Bibliography by writing
to Government Printing Office, Superin-
tendent of Documents, Washington, DC
20402-9328.

Many federal agencies offer publications
of interest to small businesses. There is
a nominal fee for some, but most are free.
Below is a selected list of government
agencies that provide publications and
other services targeted to small busines-
ses. To get their publications, contact
the regional offices listed in the tele-
phone directory or write to the addresses
below:

Consumer Information Center (CIC)
P.O. Box 100
Pueblo, CO 81002
The CIC offers a consumer information
catalog of federal publications.

Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
The CPSC offers guidelines for product
safety requirements.

U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
The USDA offers publications on selling
to the USDA. Publications and programs on
entrepreneurship are also available through
county extension offices nationwide.

U.S. Department of Commerce (DOC)
Office of Business Liaison
14th Street and Constitution Avenue, NW
Room 5898C
Washington, DC 20230
DOC’s Business Assistance Center provides
listings of business opportunities avail-
able in the federal government. This ser-
vice also will refer businesses to differ-
ent programs and services in the DOC and
other federal agencies.

U.S. Department of Health and Human Services (HHS)
Public Health Service
Alcohol, Drug Abuse and Mental Health Administration
5600 Fishers Lane
Rockville, MD 20857
Drug Free Workplace Helpline: 1-800-843-4971.
Provides information on Employee Assistance
Programs.
National Institute for Drug Abuse Hotline:
1-800-662-4357.
Provides information on preventing substance
abuse in the workplace.
The National Clearinghouse for Alcohol and
Drug Information: 1-800-729-6686 toll-free.
Provides pamphlets and resource materials on
substance abuse.

U.S. Department of Labor (DOL)
Employment Standards Administration
200 Constitution Avenue, NW
Washington, DC 20210
The DOL offers publications on compliance
with labor laws.

U.S. Department of Treasury
Internal Revenue Service (IRS)
P.O. Box 25866
Richmond, VA 23260
1-800-424-3676
The IRS offers information on tax require-
ments for small businesses.

U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
401 M Street, SW (A-149C)
Washington, DC 20460
1-800-368-5888 except DC and VA
703-557-1938 in DC and VA
The EPA offers more than 100 publications
designed to help small businesses under-
stand how they can comply with EPA regula-
tions.

U.S. Food and Drug Administration (FDA)
FDA Center for Food Safety and Applied Nutrition
200 Charles Street, SW
Washington, DC 20402
The FDA offers information on packaging and
labeling requirements for food and food-
related products.

For More Information

A librarian can help you locate the specific
information you need in reference books. Most
libraries have a variety of directories, indexes
and encyclopedias that cover many business topics.
They also have other resources, such as

– Trade association information – Ask the li-
brarian to show you a directory of trade
associations. Associations provide a valuable
network of resources to their members through
publications and services such as newsletters,
conferences and seminars.
– Books – Many guidebooks, textbooks and manuals
on small business are published annually. To
find the names of books not in your local li-
brary check Books In Print, a directory of
books currently available from publishers.
– Magazine and newspaper articles – Business and
professional magazines provide information
that is more current than that found in books
and textbooks. There are a number of indexes
to help you find specific articles in periodi-
cals.

In addition to books and magazines, many libraries
offer free workshops, lend skill-building tapes
and have catalogues and brochures describing con-
tinuing education opportunities.

About author

SMB Reviews
SMB Reviews 473 posts

SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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