Many small family businesses disregard nonqualified deferred compensation because these plans don’t provide a tax deduction until disbursement. But other family businesses are large enough to worry less about such tax matters and more about retaining key employees, especially nonfamily executives. Because qualified plans are limited in scope, many of these larger businesses use nonqualified plans to compensate and retain nonfamily executives.

When planning a family trip by car, you select your destination and then map out a route. This same logic holds true in the case of managing your family business. The destination is the set of objectives you wish to obtain, and mapping out the route refers to the strategies you plan to reach those objectives. Strategic planning is the process by which you design a route to take your business to the next level of success.

Are You Ready To Hit the Road?

Family businesses may not always need to issue formal financial statements. Absent the need to report to others, you can probably get by with simple flash reports and cash flow projections. But if your family business’s associates include outside shareholders and lenders, you may need to generate complex financial statements with footnotes and detailed disclosure remarks.

Could Your Family Business Use an Advisory Board?
Business owners continue to debate whether organizing an advisory board -- a group of outside professional advisors -- to help run a family business is worth the time and cost. During the past several years, family businesses increasingly have used advisory boards, but with mixed results. As usual, the answer seems to lie in your company’s unique needs.

In the course of events in multigenerational family businesses, a family member may suggest bringing an inlaw into the business. These requests can often cause great anxiety for the family members already in the business, especially for the member in charge. Family members may consider the inlaw incompetent or simply not ready to assume an active role in the business. Sometimes family members think that only blood relatives are entitled to join the business, similar to European royal family members who are born into succession.

Recruiting and retaining bright young executives to assume leadership roles in family businesses has been a continuing dilemma in many maturing family enterprises. Several steps can be taken to ensure successful employment experiences for nonfamily employees, whether their role is to fill gaps between the founding generation and the younger generation, or to fill a specialized need that family members cannot. Although the categories below are not all-inclusive, they are key to making nonfamily employees feel comfortable with the company.

Many family businesses try to balance the need to control wages with the need to pay experienced people in key positions. Other than wages, nothing affects employees as much as benefits. The trend in employee benefits budgeting is similar to budgeting in other areas focusing on defraying or increas-ing costs to employees. One way to do this without cutting employee coverage is to pro-vide a menu of benefits and allow employees to pick and choose. A Section 125 cafeteria plan allows employees to pay for their costs with pre-tax dollars. But you must be careful in this area.

Is your business in a cash crunch? Have you been looking to borrow money for expansion, but been turned down by a bank because your credit history is nonexistent or less than exemplary? Many family businesses may need additional financing but have had prob-lems using conventional lenders, such as banks, because they donít meet the banks’ stringent financial standards or are undercapi-talized. If these problems sound familiar, consider one of the many programs offered by the Small Business Administration (SBA) as an alternative financing source.

Something seemed wrong at Leo’s Lawncare business. Leo had always trusted his employees, taking great care to screen them before hiring. Lately, however, he noticed money had been disappearing from the company’s petty cash fund. Leo had never suspected any of his employees of acting fraudulently in the past, but now it was something he had to consider.  With the increase in financial fraud over the years, many business owners are encounter-ing situations similar to Leo’s.