U.S. Small Business Administration                          EB-1
       TRANSFERRING MANAGEMENT IN THE FAMILY-OWNED BUSINESS
Professor Nancy Bowman-Upton
Director, Institute for Family Business
Hankamer School of Business
The John F. Baugh Center for Entrepreneurship
Baylor University
Waco, Texas
                      Emerging Business Series
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Copyright 1991, Nancy Bowman-Upton. All rights reserved.  No part
may be reproduced, transmitted or transcribed without the
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                         TABLE OF CONTENTS
INTRODUCTION
UNDERSTANDING THE FAMILY BUSINESS
     What is a Family Business?
     Issues in the Family Business
     Who Are the Actors?
BALANCING FAMILY AND BUSINESS GOALS
     Business Strategic Planning
     Family Strategic Planning
     The Family Retreat
CHOOSING A SUCCESSOR
     Initiation
     Selection
     Education
     Transition
     Letting Go
     Board of Directors
     Making Succession Work
     Summary
ESTATE PLANNING
     Transfer Tax Deferral Techniques
     Transfer Tax Exclusion Techniques
SUMMARY
REFERENCES
APPENDIXES
     A. Family Business Assessment Inventory
     B. Strategic Plan Checklist
     C. Pre-Retreat Planning
     D. Assessment of Candidates
     E. Information Resources
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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 businesses generate about half of the country's Gross
National Product and half of the total wages paid.
The American economy depends heavily on the continuity and
success of the family business. It is unfortunate, 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. Founders are trying to decide what
to do with their businesses; however, the options are few. The
following 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 survive transfer of
ownership requires a good understanding of your business and your
family. There are four basic reasons why family firms fail to
transfer the business from generation to generation 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 transferring a
family business difficult, if not impossible. 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 maintain 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 criteria 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 strategic plan
      will address other issues that are important to your
      family. By implementing this plan, you may avoid later
      conflicts about compensation, sibling rivalry, ownership
      and management control.
   *  A succession plan will ease the founding or current
      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 company 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 succession process, they may be more apt to continue 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 overwhelming. 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 information with all family members, active and
nonactive. 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 successful 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.
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UNDERSTANDING THE FAMILY BUSINESS
This section will explore the nature of the family business as a
dual operating system, and will identify issues of greatest
concern to family business owners, as identified by family
business owners across the United States. As you review these
issues, 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 -- understanding the viewpoints of the different actors
involved 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 business 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 involved 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 overlap. This is where
conflict may occur because each system has its own rules, roles
and requirements. For example, the family system is an emotional
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 communicating 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.
     Figure 1 is a graphic not available in .txt format
Conversely, the business system is unemotional and contractually
based. Entry is based on experience, expertise and potential.
Membership is contingent upon performance, and performance is
rewarded materially. Like the family system, roles in the
business, such as president, manager, employee and
stockholder/owner, carry specific 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 between 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 appropriate 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 mediating management conflicts
between family members whether or not they have the desire or
qualifications to do so.
A special case of role carryover may occur when an individual is
continually cast in a particular 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 affect the business,
but when they do it can be very embarrassing. Often you say
things to family 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
surprised by a son's or daughter's negative reaction 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 interest arise
between the family and the business. Some families put personal
concerns before business concerns instead of trying to achieve a
balance between the two. It is important to understand that the
family's strong emotional attachments 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 managed 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.
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 potentially 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 establishing a forum
conducive to it, will be addressed 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, managing a family business will be difficult.
The actors in the family business can be divided into two groups:
(1) family members and (2) nonfamily members. Each group has its
own perspective and set of concerns and is capable of exerting
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 result of their neglect and the resentment
expressed 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 similar,
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 individual, conflict may arise for a
number of reasons. For example, if he or she compares himself or
herself to the family member who has an ownership position but is
not an employee, a sense of inequity may result. The member may
voice his or her resentment: I'm doing all the work, and they
just sit back and get all the profits. Or resentment may occur
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 company. Why didn't they ask me? Family members
employed 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 position. 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
operations. 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 retired relatives.
Their major concern usually is the income provided by the
business; thus, anything that threatens their security may cause
conflict. For example, if the managing owners want to pursue a
growth strategy that will consume 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 conflicts 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 opportunity for
advancement, accepting children of nonfamily 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 ownership
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 accept. A thorough
understanding of the behavioral consequences of an employee stock
ownership program (ESOP) should be grasped before a family
implements such a program. Understanding the perspective of the
individuals around you, both family and nonfamily, will make
communicating and decision making easier.
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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
economic 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
different 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 mission 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 Strategic Plan Checklist, can help
you review the steps in strategic planning.
Business Strategic Planning
Strategic planning for family-owned businesses requires that you
integrate family issues, such as:
   1. What are the long-term personal and professional goals of
      family members?
   2. What is the family mission? Why are you committed 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, benefits 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 guiding its development
and success in the future. This process involves assessing the
internal operations and the current external environment (i.e.,
economic, 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 situation 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 addressed 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 personal 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 externally. Your personal objectives should mesh with
your strategy.
Once you have identified opportunities in the industry, 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 accomplishment of the firm's
mission. Objectives should be clearly stated, realistic,
measurable, time specific 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), diversification, merger or retrenchment
      (turnaround or divestment).
Action Steps
Once the strategy is selected, action steps should be specified
that will guide the firm's daily activities. 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 statement 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 create
a unified vision of the firm. This vision will include personal
goals and career objectives.
An important issue to consider is how to set priorities for the
family and the business, i.e., decide which will come first, the
family or the business. How you answer this question will
influence your planning. Some family members will opt for the
business first, reasoning that, without a business, 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 business objectives. For example, a family may have a policy
that any family member may join the business, 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 individual family members and the goals of the
business. 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 making. 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
planning 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 typical.
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              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 company and how
                  family members fit in.
      3:30- 5:00  Prepare written statements of the family
                  and business mission statements and goals.
     Day 2
      8:00-10:00  Discuss areas in which policies need to be
                  drafted (e.g. entry exit compensation).
     10:00-11:30  Prepare a preliminary draft of policies.
      1:00- 3:00  Discuss areas in which better communications
                  are needed. What methods are needed to keep
                  everyone (including nonoperating family
                  members) informed?
      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 issues 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 problems 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 responsibility for implementation assigned.
When agreement cannot be reached, further discussions should be
planned, possibly with the continued assistance 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 members have reached a consensus on the
continuity of the firm and their roles in it, you can begin
planning for succession.
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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 succession
conspiracy by Ivan Landsberg (1988). He cites a number of forces
that act against succession 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 relationship 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 employees of the business.
Succession occurs in four phases: initiation, selection,
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 relatives, 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 attitude. 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 often 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 disastrous 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 owners avoid the issue entirely,
adopting an attitude 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 restrictions 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 corporations, 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 corporate executive succession. In
this model, family 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 possibly 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 valuations and financial statements, the ability to
negotiate and a good relationship with local financial
institutions.
Designing such job descriptions provides a number of benefits.
First, it removes the emotional aspect 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. Finally, the founder may feel more comfortable
knowing 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, committed
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
evaluation of successors. In the TBO process, both the trainer
(you or a nonfamily manager) and the trainee (potential
successor) work together to define what the trainee will do, the
time period for action and the evaluation process to be used.
This system allows the successor to be placed in a useful,
responsible position with well-delineated objectives. It also
provides for steps of increased responsibility as goals are met
and new, more rigorous goals are established. It is important
that the successor enter the firm in a well-defined position.
Instead of entering the company as assistant to the president,
which requires that he or she follow the president around all
day, the successor (or any other child) should enter with a
specific job description. In a small business this is very
difficult because everyone is usually responsible for all tasks.
Nevertheless, the successor cannot be evaluated effectively if he
or she is not given responsibility and authority for certain
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 following 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 decision. 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 managers neglect. This will give everyone time to
get to know your successor and allow the successor 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 entrepreneur's
      participation in daily activities.
   *  The entrepreneur is publicly committed to an orderly
      succession plan.
   *  The entrepreneur has articulated and supervised the
      formulation of company principles regarding management
      accountability, policies, objectives and strategies.
The transition can be effected gradually by relinquishing more
and more responsibility to the successor. One expert advises the
entrepreneur to take a number of planned absences before actually
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 semiretirement. 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 retirement.
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 probably 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 financial 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 consequences 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 provide effectively for your retirement,
seek professional assistance in this area.
There are other reasons why the entrepreneur doesn't want to let
go. One of the primary reasons 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 meaningful life. The intense involvement the
entrepreneur has with the business increases the importance of
the job and his or her identity. Removal 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. Especially 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 uncommon for a founder to give a
successor the responsibility for running a firm and still try to
retain 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 directors, but a
board can be invaluable during the succession process. A board
can help management 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 usually 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 balances. 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 difficulties 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 commitment to any members. Boards can expand your network,
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 issues.
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
direction 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 invited
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 Directors 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 retreat as well as family meetings.
Family meetings 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 issues
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 conducive to a healthy business),
including how to work together, how to play together and how to
keep spouses informed about what's going on. Anticipate 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 business. 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 announcement, including
(1) reassuring employees, suppliers 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 attorney who understands family business
and the laws concerning transferring business assets across
generations. 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 recapitalization 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 particular point in time.
Estate taxes are reduced because 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 children, they will pay estate taxes
in the form of gift taxes. It is highly recommended that you
consult 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 installment payment.
The last will and testament is a legal declaration 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 residence has prepared
one for you through its laws and regulations.
The living trust is a completely changeable agreement 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 donor'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 benefit your surviving spouse can receive is the
mandatory distribution of income from the trust property. 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, remaining 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 installment payment of
the federal estate tax attributable 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 business, and your interest in the business
must have a value equal to at least 35 percent of your estate.
Qualification of the deferred payout 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 annual
exclusion gift, unified credit/exemption equivalent gift and the
statutory grantor retained 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 maximum amount of property you can leave to
grandchildren or other third generation beneficiaries 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
appreciation in value and future income from them, are also
excluded from federal estate and generation-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 exclusion 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 credit'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 appreciation 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 creation 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 important 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 guidelines 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): 119144.
Ward, J.L. Keeping the Family Business Healthy. San Francisco:
Jossey-Bass Publishers, 1988.
_________________________________________________________________
APPENDIX A: FAMILY BUSINESS ASSESSMENT INVENTORY
                    Section I                        YES    NO
Business issues
 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 nonfamily 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. Unresolved issues should be discussed and polices
established to resolve them.
_________________________________________________________________
APPENDIX B: STRATEGIC PLAN CHECKLIST)
                                                     YES    NO
 1. Have I listed the emerging opportunities 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 required 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 divisions?
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 statement?
 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 successors 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.
The Columns should be labeled
   *  Name
   *  Related education
   *  Relevant experience
   *  Commitment to family and firm
   *  Management style
   *  Communications ability
   *  Financial stewardship for the family
   *  Creativity
   *  Guts and ambition
   *  Alignment with your values
   * Totals
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 across the bottom 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.
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 programs and services,
including training and educational programs, counseling services,
financial programs and contract assistance. Ask about
     *     SCORE: Counselors to Americas Small Business, a
           national organization sponsored by SBA of over 11,000
           volunteer business executives who provide free
           counseling, workshops and seminars to prospective and
           existing small business people.  Free online counseling
           and training at www.score.org.
     *     Small Business Development Centers (SBDCs), sponsored
           by the SBA in partnership with state governments, the
           educational community and the private sector. They
           provide assistance, counseling and training to
           prospective and existing business people.
     *     Womens Business Centers (WBCs), sponsored by the SBA
           in partnership with local non-government organizations
           across the nation. Centers are geared specifically to
           provide training for women in finance, management,
           marketing, procurement and the Internet.
For more information about SBA business development programs and
services call the SBA Small Business Answer Desk at 1-800-U-ASK-
SBA (827-5722) or visit our website, www.sba.gov.
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. Find a Catalog of
Government Publications at http://catalog.gpo.gov/F
Many federal agencies offer Websites and 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
businesses. To get their publications, contact the regional
offices listed in the telephone directory or write to the
addresses below:
Federal Citizen Information Center (FCIC)
Http://www.pueblo.gsa.gov
1-800-333-4636
The CIO offers a consumer information catalog of federal
publications.
Consumer Product Safety Commission (CPSC)
Publications Request
Washington, DC 20207
http://www.cpsc.gov/cpscpub/pubs/pub_idx.html
The CPSC offers guidelines for product safety requirements.
U.S. Department of Agriculture (USDA)
12th Street and Independence Avenue, SW
Washington, DC 20250
http://www.usda.gov
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
Washington, DC 20230
http://www.osec.doc.gov/obl/
DOC's Business Liaison Center provides listings of business
opportunities available in the federal government. This service
also will refer businesses to different programs and services in
the DOC and other federal agencies.
U.S. Department of Health and Human Services (HHS)
Substance Abuse and Mental Health Services Administration
1 Choke Cherry Road
Rockville, MD 20857
http://www.workplace.samhsa.gov
Helpline: 1-800-workplace. Provides information on Employee
Assistance Programs Drug, Alcohol and other 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)
1500 Pennsylvania Avenue NW
Washington DC 20230
http://www.irs.gov/business/index.html
The IRS offers information on tax requirements for small
businesses.
U.S. Environmental Protection Agency (EPA)
Small Business Ombudsman
1200 Pennsylvania Avenue NW
Washington, DC 20480
http://epa.gov/sbo
Hotline: 1-800-368-5888
The EPA offers more than 100 publications designed to help small
businesses understand how they can comply with EPA regulations.
U.S. Food and Drug Administration (FDA)
5600 Fishers Lane
Rockville MD 20857-0001
http://www.fda.gov
Hotline: 1-888-463-6332
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 librarian 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 library 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 periodicals.
      *    Internet Search Engines
In addition to books and magazines, many libraries offer free
workshops, free access to computers and the Internet, lend
skill-building tapes and have catalogues and brochures
describing continuing education opportunities.
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