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nWho need Succession Planning?

a. those who want their business to develop and grow with as well as without them.

b. those who want their family to be happy and economically independent with as well as without them.

Why succession planning is required?

a. dependency in old age

b. family responsibilities increase with age

c. business need continuity or sale

d. visualization helps you work and plan better

nHow can we help?

We can objectively analyze your individual, family and business needs in the context of your present and future plan and circumstances which has significant impact on it.

a. it is not linear with age as it was in past. You may get increment or loose a job or you may get salary reduction instead of increase or you may get VRS etc.

b. Employment or business earnings are decided by market. As in business we have product life cycles so in job we have life cycle, both equally vulnerable to competition.

n c. Increasing downsizing in companies is a trend not an exception.

n d. Jobs have shifted from permanent to temporary, part time, freelance, franchisee, home based, contractual etc.

e. nBusiness earnings and salaries are getting internationally stabilized due to opening up of economies, outsourcing etc.

f. nTax is unavoidable while planning earnings.

a. nIt is mostly linear and increases with age. Regular household expenses are linear.

b. nAfter household expenses house purchase, children’s/ dependent’s education/marriages/ dowry, parents medical expenses etc. are major heads.

n c. Obligations are mostly rigid and increase with age.

n d. If not well planned it becomes cause of great tension as you grow old.Other risks mentioned in earnings adds to it.

n e. Increasing life expectancy (retired life is more than working life) day by day is compelling us to provide more for old age expenses.

n f. Inflation is reality (salary increments are not) and eats your yield on investment besides increasing your family obligations.

n a. Investments increase with age till marriage then decreases with family responsibilities.

n b. Inheritance/ increase of investment many times accompany extra family responsibilities.

n c. Risk may wipe out your investment. It needs to be balanced. Reduce your risk as you grow old.

n d. Non-liquid investment like residential flat, gold etc. may not help you to plan for old age.

n e. Investment in education may reward next generation but will still be an expenditure for you.

n f. Increasing job/business uncertainties can wipe out your investment.

n a. Only about one out of ten family businesses survives to the third generation. This only proves the importance of succession planning beyond doubt.

n b. If succession planning is not planned you loose much more in distressed sale of business/properties than fees of succession planning professional.

c. nEmotions with business created by you should not itself become barrier to it’s succession.

d. nLack of succession plan will de-motivate your employees and you will loose much more in business or it’s sale.

e. nYour business may not be worth what you are imagining. Your kids may have better job avenues than participating in your business.

f. nYou need to ensure smooth transition for the next generation to take over the business.

n a. Business to job or job to business needs succession plan to have smooth transition.

b. nIncreasing VRS employees has challenges of facing unfulfilled family obligations, unwillingness or age barrier to seek fresh job, yet equipped with enthusiasm & experience to pursue career in business/ freelance, franchise, part time etc., lack of skill to identify business opportunities etc.

c. nEven a job change from one country to another needs a succession plan especially coming back to home country from overseas jobs.

d. nUnlike job, business has gestation period.

n a. Cost of living substantially changes and need a lot of homework.

n b. Earning potential from job or investments need to be reviewed keeping tax issues in mind.

c. nSettlement in new country like house purchase, relocation expenses etc. needs to be provided adequately.

d. nFamily responsibilities like education, marriages, parent’s old age expenses, retirement provision need a close attention.

e. nEmotional issues of other family members have significant impact on such decisions and need orientation before taking decision.

a. nAt around 26 you buy house and loan cutting includes in your expenses, at 28 you marry, at 45 age your child starts college education (increase in family exp), at around 55 age you plan to marry your child (exp for family responsibility) and you retire.

b. nHome expenses remain linear and does not come down almost even after 55 age when the child become financially independent as your medical expenses increase.

c. nYou consume your investment for marriages and other family responsibilities.

d. nYour retirement life many times is more than your working life.

e. nPresent interest rate around 4% are lower than inflation around 5%.

n a. Do not postpone succession plan.

b. nLesser investment needs more guidance of succession planning professional as your investment is much more precious to you.

c. nAvoidance or postponement of consultation will only invite complex problems in future.

d. nConsult proper and independent professional who does not give you any other professional service than succession planning as he will not have vested interest in you for other fees. Don't go for cheap consultancy, you will get the same results.

e. nIdentify your successor in business.

f. nKeep open mind to discuss all angles of succession plan with succession planning professional.

g. nSuccession planning professional will guide you even to take assistance of your existing professionals.

n h. Like we teach our child to walk we need to do the same for business/ family succession. i. It is not only money but also visions, dreams and emotions.

j. nIt is helping you objectively to manage people around you and resources with you to suite the best for your unique situation from both economical and emotional point of view.

k. nNothing will survive longer than the vision, dreams and thoughts which you have shared with people around you, we only help your team to translate it in reality and pass it on further.

nMr. Ajay age 42 a senior executive in India drawing 6 lac p.a. suddenly realizes that his company is not doing well and it is right time to exit. He has invested 12 lac in residential flat and has 8 lac liquid investment. He got next offer with 4 Lac. This year his 18 year daughter want to join a city college costing him around Rs. 2.5 lac p.a. His younger son is in SSC and will be going to college after 2 years. He has no pension.

a. What if he gets job after 6 months/ 1 year?

b. What if his parents medical expenses increases as they will be around 70 years old?

c. What will he do for daughter’s marriage after 4 yrs?

d. What if his son gets admission in USA for BS?

nMr. Kapoor age 43 executive in gulf saving 15 lac p.a. , investment 75 lac migrates to Canada, his living cost there is 30,000 USD p.a or 13.5 lac p.a., he estimated that he will get job of 4000 usd p.m. within 2/3 months but is still looking for job after 6 months. Wife understands the situation but children are happy in school and surroundings. Daughter will go to college this year and education will cost further by 12000 USD p.a.

a. Should he come back to Gulf/ India? If so how will he handle emotional issues of children?

b. Should he continue in Canada searching his job till he exhaust his saving?

c. if (a) does he know prevailing living cost in localities where he has his flat, available job opportunities, educational expenses, willingness of his and family to get absorbed in Indian fast, hectic life? Will his 2nd job offer in gulf be same?

nMr. Chaudhary an Indian entrepreneur age 48 earnings around 6 lac p.a. has grocery shop. He has investment of 25 lacs son age 22 (finished college), daughter age 20, both parents are staying with him, son/daughter are intelligent and have good academic credentials. He wants to marry daughter in this year and marriage will cost around 5 lac. He has his ancestral home and is happy with present position. Now he wants his son to take over his business but son feels that his job offer of 6 lac at present without any headache is worth more than 6 lac annual earnings from business. Mr chaudhary devotes minimum 12 hours for his business every day many times even Sunday is not spared. Since last 5 years they have not gone on family picnic.

a. Should he sell/ give franchise/ give on profit sharing his business built over 30 years? If so what will be the financial implications?

b. After 7 years he may have investment of approx 28 lac his living exp are around 180,000 and interest will be around 84,000 at 3% What should he do?

c. He noticed that upcoming neighboring malls will erode his earnings and potential sale value of his business too, but does not know whether to postpone or not the sale of his business.

a. nNothing but change is permanent. When you are busy creating your wealth you may be unaware of the changes around you or in your home country or in a country where you plan to migrate. Each time is right time to plan for succession.

b. Postponement of problem will always create more problem as expenses are linear but not the earnings, family responsibilities are directly proportional to age, investment once wiped out is almost impossible to rebuild after retirement.

c. A stitch in time will always save nine. If you cannot improve at least you can prevent it from worsening.

d. When compelled by circumstances you always loose your buying power whether in business or job.

e. As you share your joys and happiness with family share your concerns too. Nowhere in the world you have stronger family system than India where parents are treated as God & home a temple. Children get an overview of generations from grandparents in a very friendly way which no professional or school can teach.

f. Let your visions, dreams and emotions flow continuously to be shared by all family members, it will last more than your money.

g. In today’s world nuclear families and working women are common and have wider challenges to play multiple roles.

h. Everything that you earn may not always be under your control, sometimes for small efforts you may get big and sometimes nothing at all in spite of long efforts. But in general easy come easy go.

n i. Change is permanent and change always results from actions. It is great skill in life to bear the things you cannot change and to empower our actions to work on the things we can change.

n j. As you discard your clothes so does the atma discards body is said in Gita. We too need to have open mind to discard old unsustainable thoughts in today’s changing world to give birth to new rejuvenated ideas ready for tomorrow’s world carrying the same indestructible atma but in different clothes.

Family Businesses.

a. nTen years after India opened up its economy to multinationals and global competition, the country's family-run industrial empires remain intact and stronger than ever.

b. nThe aggressive Ambani brothers Mukesh, 44, and Anil, 42, sons of the firm's 68-year-old founder Dhirubhai Ambani, call the shots at Reliance, while the more reticent Kumarmangalam Birla,34 takes all major decisions at the $6.4-billion Birla group which spans metals and insurance

c. nLiberalization has encouraged people to start their own firms, and there is a resurgence in family-run businesses as a whole.

d. nThere were 80,000 company start ups in 1998-99, and these firms will see maximum growth in the first 20 years of their life.

e. nFamily-run businesses have advantages: risk-taking ability, speed of decision and long-term vision," says Manesh Shrikant, dean of Bombay's S P Jain Institute of Management & Research.

f. nBut increased competition has seen a shakeout of some well-known names. “ A large number of family-run companies have failed," says Shrikant. "And families have too often enriched themselves at the cost of companies they have founded."

n g. Often family-run companies have been bound by tradition and not moved fast enough."The Mafatlals (chemicals), Sarabhais (pharmaceuticals), Walchand (engineering), Modis (rubber) have fallen behind as they have not kept up with the times," says Gita Piramal, author of the much-acclaimed Business Maharajas, a book on Indian business families.l

n h. Cases where families have handed operations over management to professionals are the exception rather than the rule in India like Thermax, Ranbaxy Laboratories.

n i. The Marwaris, who controlled Indian business for a half century are falling away fast, while entrepreneurs have sprung up in all communities," says Gita Piramal.

Education and saving for future generations is a priority.

a. nReferring to the investment profile of the South Asian community, Chopra said: "Studies by Merrill Lynch have shown that South Asians are highly conservative with a very strong propensity towards saving. Education and saving for future generations' educational needs continues to be a top priority.

b. n"Retirement saving and financial planning is also extremely important, particularly among South Asian physicians and healthcare providers. We have found from a business standpoint considerable success in the following sectors: technology entrepreneurs, physicians and health care providers, small business owners and corporate executives. And most of the wealth we are finding has been sourced largely through work or work related accomplishments.“

The higher your salary, usually the higher your discretionary savings ratio. Before the age of 40 it is difficult for most salary earners to accumulate significant savings. Usually expenses on children, the house, and transport are too high to make meaningful savings possible. Accordingly at the start of your working life your savings as a percentage of after tax income will often be around 5% (slightly less for lower-skilled workers and slightly more for management). However, after the age of 40 your discretionary savings ratio should rise steeply, say, to some 10% for unskilled workers and to about 30% for chief executives. Over your entire working life, savings should ideally average not less than 10% of after-tax income and for executive management an average savings ratio in excess of 30% is strongly recommended.