Leaders of family businesses are urged to use a transition plan to ensure future generations can keep the business viable, experts said Thursday.
Planning is essential to establish credible leaders, a smoother path for finances and reassurance that the business will be around after the owner is gone.
"Bad things can happen if you don't plan," said Bill Price, a business lawyer with Growth Law.
Price and other panelists talked about the best ways to manage a family business for future generations during the Newsmakers' Forum in Lisle, hosted by the Daily Herald Business Ledger.
Transitions for future leaders often takes years, so family companies are urged to start as soon as possible. Part of the strategy could include a buy-sell agreement, which outlines who can buy in or sell their shares of a company and provide more clarity on ownership.
"Some owners decide to sell the company while they're still in control," Price said. "Or they do estate planning to ensure what gets handed down to family members."
Many family businesses are started by relatives or spouses. When the next generation starts growing up, the owners must determine who is the next likely leader and how to groom them for that position, Price said.
Jeff Krusinski, president of Krusinski Construction Co. in Oak Brook, took over his family business last year and still looks for guidance from his father and uncle, who started the company. He also hired an executive coach to help him learn more about leadership and how to help the company grow.
Paul Janik, president of MidCo Inc. in Burr Ridge, learned he would be the next leader at a Christmas party when his father made the announcement without telling him in advance. He learned another employee's wife said they should get their resumes ready because "they figured this kid is taking the company down," Janik recalled.
While MidCo survived and thrived under him, despite what others initially thought, Janik believes family businesses should establish a solid transition plan. That plan also should include education and experience outside the family company, to help broaden knowledge and expectations.
"Just like I lived in the shadow of my dad, my shadow is out there now, and that's why we encourage our children to make their own way first. They should make a name for themselves and volunteer in other organizations," Janik said.
Jeff Conrad, a tax consultant at BKD, said owners should learn what their business is worth, establish a strategic plan, and get the right people lined up to one day take over. Sometimes this process takes years.
"You have to know your bench strength, or who is the next one to come up and take over," Conrad said. "If someone wants to buy your company, they want your management in place."
The presenting sponsors included DePaul University, Chicago Family Business Council, BKD LLP and Growth Law. Marketing partners are the Management Assocation-the HR Source for Employers, GOA Regional Business Association, Small Business Advocacy Council and MRA-the Management Assocation.