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First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution

If you missed Issues #1 & 2, e-mail: rick@ceostrategist.com for copies of these issues.

This month’s issue contains:

• The Housing Bubble --- Is It Finally Ready to Burst?”

• First in a series on “The Challenges Facing Family Owned Businesses”

--- How can you turn over your business to your children without creating chaos?

• Kids and Guns

• 15 Revealing Questions To Ask A New Sales Candidate

• Client Corner --- “My Kids Can’t Cut It”

The Housing Bubble --- Is It Finally Ready to Burst? ---- Economists have been predicting the burst of the bubble for the past five years. Every year they have been wrong. 2005 was supposed to be the year when things really started to slow down. Low and behold, 2005 was another banner year. Those in the building supply business are sitting around smiling as they count the profits. I am not an economist, thank God, but maybe, just maybe the economists are going to finally be right as some signs are beginning to show that may indicate a slow down in the housing boom. And of course, the auto industries problems, specifically General Motors with their recent layoffs and plant closure announcements just adds strength to this conjecture. What’s the old saying? “So goes General Motors, so goes the economy.”

Sales of existing homes fell almost 3% in October and the decline could have been higher except for the demand created by the surge of Hurricanes, especially Katrina. The level of unsold homes in October was at its highest peak in nineteen years. Some of this may be attributed to the fact that prices have risen at a pace not seen in twenty five years. A chief real estate economist stated; “The housing boom has likely passed its peak. (We have heard this before) The boom is winding down. I expect continued softening in housing.” (David Lereah, chief economist for Realtors.)

Economists also predict that the buildup of unsold homes across the nation would dampen the surge in prices that saw 69 cities report double digit price increases this summer compared with third quarter 2004. Another prediction is an additional ? point increase in interest rates by June of 2006 which could create a slow down in price increases to about 5% next year.

In reference to new construction, it also has shown signs that the bubble may be ready to burst. Housing construction and new building permits were down sharply in October. The Commerce Department reports that construction of new homes and apartments fell by almost 6%, which was the biggest decline in seven months. Applications for new building permits fell almost 7%, which is the biggest decline in six years. Nariman Behravesh, another expert chief economist stated, “We are likely to see a steady downward trend in housing activity over the next few months. Mortgage rates are at the highest level seen in more than two years.” National Association of Home Builders said a new survey showed builder optimism fell in November, the largest amount since the September 11th terrorist’s attacks.

So, is the bubble ready to burst? Many economists seem to thinks so. However, the statistics cited have been cited in the past. The predictions of a bubble burst have been reported in the past. On the other hand, some economists disagree at least partially. David Seiders, chief economist for home builders stated that he believed that sales of both new and existing homes, while still setting records for a fifth consecutive year in 2005, will only see a small 5% decline in 2006. This would represent a very soft landing (5% is not much considering the growth we have experienced over the past five years). Do they really know? Who knows? Maybe that’s why Roosevelt said he would only deal with “One Armed Economists.” So they couldn’t say, “On the other hand”…

Be cautious in 2006. Don’t panic but don’t bet the farm. Initiate a contingency planning process. If you don’t need the plan in 2006, so what, sooner or later the economists might get it right and that contingency plan that you have tucked away will become invaluable.

__________________________________________

First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution.

Sales of existing homes fell almost 3% in October and the decline could have been higher except for the demand created by the surge of Hurricanes, especially Katrina. The level of unsold homes in October was at its highest peak in nineteen years. Some of this may be attributed to the fact that prices have risen at a pace not seen in twenty five years. A chief real estate economist stated; “The housing boom has likely passed its peak. (We have heard this before) The boom is winding down. I expect continued softening in housing.” (David Lereah, chief economist for Realtors.)

Economists also predict that the buildup of unsold homes across the nation would dampen the surge in prices that saw 69 cities report double digit price increases this summer compared with third quarter 2004. Another prediction is an additional ? point increase in interest rates by June of 2006 which could create a slow down in price increases to about 5% next year.

In reference to new construction, it also has shown signs that the bubble may be ready to burst. Housing construction and new building permits were down sharply in October. The Commerce Department reports that construction of new homes and apartments fell by almost 6%, which was the biggest decline in seven months. Applications for new building permits fell almost 7%, which is the biggest decline in six years. Nariman Behravesh, another expert chief economist stated, “We are likely to see a steady downward trend in housing activity over the next few months. Mortgage rates are at the highest level seen in more than two years.” National Association of Home Builders said a new survey showed builder optimism fell in November, the largest amount since the September 11th terrorist’s attacks.

So, is the bubble ready to burst? Many economists seem to thinks so. However, the statistics cited have been cited in the past. The predictions of a bubble burst have been reported in the past. On the other hand, some economists disagree at least partially. David Seiders, chief economist for home builders stated that he believed that sales of both new and existing homes, while still setting records for a fifth consecutive year in 2005, will only see a small 5% decline in 2006. This would represent a very soft landing (5% is not much considering the growth we have experienced over the past five years). Do they really know? Who knows? Maybe that’s why Roosevelt said he would only deal with “One Armed Economists.” So they couldn’t say, “On the other hand”…

Be cautious in 2006. Don’t panic but don’t bet the farm. Initiate a contingency planning process. If you don’t need the plan in 2006, so what, sooner or later the economists might get it right and that contingency plan that you have tucked away will become invaluable.

__________________________________________

First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution

Economists also predict that the buildup of unsold homes across the nation would dampen the surge in prices that saw 69 cities report double digit price increases this summer compared with third quarter 2004. Another prediction is an additional ? point increase in interest rates by June of 2006 which could create a slow down in price increases to about 5% next year.

In reference to new construction, it also has shown signs that the bubble may be ready to burst. Housing construction and new building permits were down sharply in October. The Commerce Department reports that construction of new homes and apartments fell by almost 6%, which was the biggest decline in seven months. Applications for new building permits fell almost 7%, which is the biggest decline in six years. Nariman Behravesh, another expert chief economist stated, “We are likely to see a steady downward trend in housing activity over the next few months. Mortgage rates are at the highest level seen in more than two years.” National Association of Home Builders said a new survey showed builder optimism fell in November, the largest amount since the September 11th terrorist’s attacks.

So, is the bubble ready to burst? Many economists seem to thinks so. However, the statistics cited have been cited in the past. The predictions of a bubble burst have been reported in the past. On the other hand, some economists disagree at least partially. David Seiders, chief economist for home builders stated that he believed that sales of both new and existing homes, while still setting records for a fifth consecutive year in 2005, will only see a small 5% decline in 2006. This would represent a very soft landing (5% is not much considering the growth we have experienced over the past five years). Do they really know? Who knows? Maybe that’s why Roosevelt said he would only deal with “One Armed Economists.” So they couldn’t say, “On the other hand”…

Be cautious in 2006. Don’t panic but don’t bet the farm. Initiate a contingency planning process. If you don’t need the plan in 2006, so what, sooner or later the economists might get it right and that contingency plan that you have tucked away will become invaluable.

__________________________________________

First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution

So, is the bubble ready to burst? Many economists seem to thinks so. However, the statistics cited have been cited in the past. The predictions of a bubble burst have been reported in the past. On the other hand, some economists disagree at least partially. David Seiders, chief economist for home builders stated that he believed that sales of both new and existing homes, while still setting records for a fifth consecutive year in 2005, will only see a small 5% decline in 2006. This would represent a very soft landing (5% is not much considering the growth we have experienced over the past five years). Do they really know? Who knows? Maybe that’s why Roosevelt said he would only deal with “One Armed Economists.” So they couldn’t say, “On the other hand”…

Be cautious in 2006. Don’t panic but don’t bet the farm. Initiate a contingency planning process. If you don’t need the plan in 2006, so what, sooner or later the economists might get it right and that contingency plan that you have tucked away will become invaluable.

__________________________________________

First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution

__________________________________________

First In A Series On Family Owned Businesses------ In 2006 we will try to cover many of the issues and challenges in “The Howl” that face privately held family owned businesses. Every family owned business faces difficult challenges. Readers are encouraged to e-mail rick@ceostrategist.com with comments, questions and topics for discussion related to the challenges faced by family owned businesses.

How can you turn the business over to your children without creating chaos--- This is probably the toughest question any business owner that has family working in the business will ever face. However, the answer is simple. The answer is….. It depends. It depends on how well you (the owner) have prepared yourself and your child for this transition. Have you planned this out? Has your successor been trained, developed and prepared for the transition? This is pretty easy if you only have one child in the business and he/she just happens to be the next Jack Welch of wholesale distribution. This child has worked outside the business for someone else for a minimum of five years. They have completed their MBA and they worked their way up in your organization starting in operations or customer service. They don’t walk around with their silver spoon visible and they don’t wear their family title on their sleeve. “Piece of Cake!”

Let’s face Reality--- That scenario, although it certainly does exist, is the exception and not the rule. In most cases privately held businesses generally have several family members working in the business. When the president has more than one child in the business, things start to get more complicated. Before we dive into that challenge, “How do we select the next President?” let’s review a few statistics.

• Family business is the driving force behind the US economy providing over 50% of our employment

• 59% of family owned businesses have only 1 or 2 owners

• 25% of family owned businesses surveyed in 2004 stated they would seek non family member CEO’s for succession

• Key areas that family owned businesses seek advice and counsel on include:

--- Strategic Planning

--- Organizational Design

--- Operational Effectiveness

--- Leadership Development

--- Succession Issues

--- Compensation

--- Sales Effectiveness

--- Risk Management

Now, how do you decide on who should be the next President? If you are not one of the lucky few described in the opening scenario and you have multiple family members working in the business, your stress level is already at a high point. First, many if not all family members working in the business have feelings of entitlement to some degree. This is generally true of at least one if not all of the president’s kids. Choosing the next president becomes even more difficult if the children have used their name as a title instead of the actual title of the job function they performed and the position they hold in the company (This is often unintentional and some kids don’t even realize it). This difficulty increases exponentially if none of the kids have demonstrated a high level of competence, respect for all employees, leadership skills that pattern the servant style and at least some promise of potential to fill the president’s shoes.

Although the majority of parents would prefer that their children take over the business and carry on the family legacy, this is not always the best option available. I know it is difficult for any parent to admit that their child may not possess the skill sets necessary to take over as President of the company. However, that situation actually does exist in many family businesses.

What are the options if Junior isn’t ready? --- The first two questions to ask yourself are: “Will Junior ever be ready?” “Does Junior have the ability to learn how to become President?”

As difficult as it is to accept, your answers to these questions alone are not good enough. If you have a Board of Directors, you should solicit their input and recommendations. Hire a Human Resource Consultant to do an assessment of not only Junior but other executives in your organization that may be qualified for the Presidency. Conduct 360 degree reviews to get input from peers and subordinates. Precisely define the Presidents role and responsibilities and match these requirements to Junior’s skill sets. If you don’t have a board, create one before the transition. Include the following action items as part of the transition plan:

• Create a development transition training program for the new President (This should be designed as an internship)

• Clearly define the former Presidents role after the transition. Will he remain and come into the office? Will he become Chairman of the Board? What responsibilities will the former President retain?

• Manage the expectations of other family members. Do not allow family tension to create tension in the business. This could lead to employees taking sides.

• Use your attorney to cover all legal issues

• Create a real Board of Directors

The Family business can be complex--- The family business structure can be complex and confusing. This is especially true when numerous family members work in the business. The business is composed of interdependent relationships between functions and people that depend on the ability to work toward common objectives. A family owned business with multiple family members has twice as many opportunities for mistakes, resentments and complacency. Teamwork is essential and ef