Most of our small business clients probably already know that the federal minimum wage increased this week from $5.85 to $6.55 an hour.  The increase is the second in a three-step process to bring the minimum wage to $7.25 an hour next year.

The increase will help workers deal with soaring energy and food costs, as described by Christopher Rugaber of the Associated Press, but many entrepreneurs are wondering if the increase will adversely affect their businesses.  In fact, according to an article by Angus Loten in Inc.com (published last year when the increase was first approved by the House of Representatives), most small business owners will not be hit by the increase, because they already pay their employees more than the state or federal minimums.

There is a web of interconnectedness in small businesses that is more readily apparent than in large corporations, which means that small business owners often can’t help but see and react to the financial well-being of their employees.  Loten, in his article, quotes Mark McCurry, the president of a small Atlanta-based delivery service as wondering “how you could pay anyone less than [the minimum wage] in good conscience?”

This seems to be the prevailing opinion of small business-owners across the country, who, according to Inc.com, generally pay employees more than minimum wage anyway, and 70% of whom reported that “raising the federal minimum wage would have little impact on their labor costs.”

Small business owners are struggling just as much as the next person with the current record inflation levels, but in an intimate work environment where the boss works side by side with employees, it’s difficult not to see how everyone is affected by the ups and downs of our recent economy. Perhaps it is for this very reason that these same small business owners are ahead of the minimum wage curve, providing for their employees and giving themselves some breathing room in the process.

“Happiness is having a large, loving, caring, close-knit family . . . in another city.”
– George Burns

To those who start hyperventilating at the mere thought of a family reunion it’s almost inconceivable that there are some families who would choose—in addition to spending their leisure time together—to work together as well.  But to a generation that has seen the trustworthy big businesses disappoint or betray their employees time and time again, the old adage “blood is thicker than water” doesn’t seem so outdated anymore.

In fact, family-owned businesses may be more pervasive than you think. Pervasive enough for Business Week Online to compile a Special Report focused exclusively on Family-Owned Businesses.

Family businesses are the oldest business in existence.  Ever since pre-historic man first dragged a son with him to hunt for skins to trade to the neighbors, it has been an honored and respected tradition.  Skills can be honed and passed from parent to child almost as naturally as breathing, and when your kids know they may end up caring for you in your old age they aren’t likely to skimp on the retirement benefits.

Family businesses are in a unique and enviable position because they straddle generations; and if they’re smart they have a hand in each one.  The Business Week Online article Room to Grow gives some great examples of how to draw the younger generation into the business—and break into new markets in the process.

Of course, a family run business has its own unique challenges as well, first and foremost of which is succession planning.  What is the best way to hand the business to the next generation?  Is it something you should be thinking of yet?  Business Week Online’s special report addresses this issue as well with their article A Transfer Tsunami for Family Biz.

In a world where large corporations are increasingly unreliable and unfriendly, family businesses are stepping into the spotlight.  If done right, they can embody the best qualities of a close-knit family while letting advisors and receptivity help them avoid the worst.  Alex Haley, the author of Roots, and a man who knew a little bit about family, said it best; “In every conceivable manner, the family is link to our past, bridge to our future.”

How is your business doing this summer?

The warm months from June to August can be an excruciatingly slow period for some small businesses and their owners.  They experience a slow summer slump while their client base goes off on vacation or relaxes at the beach.  But rather than viewing this time with dread, why not look at the summer slump as an opportunity?  This slow period can be a great time to delve into the inner workings of your business and make improvements, as this article by Colleen LeBaise on Smart Money’s Small Business site recommends.

Having just passed the second quarter milestone, summer is the perfect time for business owners to execute their midyear check-ups; reviewing performance and finances from the first half of the year and planning ahead for the next half.  DeBaise’s article has further suggestions for turning these idle summer days into productive powerhouse moments, including networking with professionals and creating a disaster plan.

During this time when you are performing your reviews and making plans for the future is a perfect time to touch base with your estate planning attorney, who can help you plan not only for any possible natural disasters, but for legal, financial, and personnel disasters as well.  And while you’re there, your estate planning attorney is a great person to ask about networking opportunities or to help you review your business plan.

Take advantage of these slow summer months to get done all those things you only have time to think about during the busy portion of the year.  Before you know it business will be heating up as the weather cools down in fall, and then the holidays will be upon us.  Give yourself a head start in these long dog days of summer.

Business partners often end up with strong friendships, but is it possible for friends to succeed as business partners?  It would seem to be a natural evolution; you know each other, you like each other, enjoy spending time together, work well together.  But the transition from friends to partners may not be as easy as you think, according to this article by Kelly K. Spors in The Wall Street Journal.

One might very well wonder why not.  What could possibly hinder two seemingly compatible people from successfully running a business?  The fact of the matter is that the qualities that make a wonderful friendship don’t necessarily make for a wonderful partnership.  The things we admire in our friends are often the things we lack in ourselves—the wild and irresponsible compliment to our sedate and rational selves (or vice versa).  But bring that delightful and wild friend into a business partnership and who will end up shouldering the burden of responsibility?

Some partnerships fail not because the two partners are incompatible, but because they are so compatible that they take their knowledge of each other for granted and neglect to talk about key issues in the business.  In such cases it is possible to know each other too well.

Does this mean that friends simply cannot become business partners?  Not at all!  With the right planning and preparation it is possible to have a successful partnership and a wonderful friendship.

What is the right planning?  Kelly K. Spores mentions three things in particular.  First, know yourself and your partner, even to the extent that you take personality tests and go on a business retreat together.  Second, draft a detailed business plan and partnership agreement.  This is where a third party (such as your trusted attorney) can be helpful. And third, have a good exit strategy.  A good exit strategy can save your friendship even if your partnership doesn’t work out.

“Good fences make good neighbors”, wrote Robert Frost; and good plans make good partners.

“The entrepreneur is our visionary, the creator in each of us. We’re born with that quality and it defines our lives as we respond to what we see, hear, feel, and experience. . . The entrepreneur in us sees opportunities everywhere we look. . . “ - Michael Gerber, founder and chairman of E-Myth Worldwide

The week of April 21-25, 2008 is National Small Business week, a week dedicated to recognizing the important role of America’s small business community. If you’re wondering just how important is the role of small businesses in the U.S. economy, take a look at these figures from the U.S. Small Business Administration, Office of Advocacy.

Small businesses:

• Represent 99.7 percent of all employer firms.
• Employ about half of all private sector employees.
• Pay more than 45 percent of total U.S. private payroll.
• Have generated 60 to 80 percent of net new jobs annually over the last decade.

These statistics are nothing to sniff at. Small businesses are what our country was built on, and even now serve as the backbone of our culture and economy. As such, small businesses must be nurtured and protected to the best of our ability. This includes taking steps to ensure a business can continue into the next generation with business succession planning, reducing the risk to a business-owner’s family and personal assets by forming an LLC or FLP, and keeping up to date with legal requirements and changes in state and federal tax codes. Your attorney can help with all of these.

If you are an entrepreneur or small business owner, the relationship with your attorney should be one of the closest relationships you have. In addition to answering your legal questions and providing asset protection, your attorney can also help you plan for the future, and update your business plan as your company grows.

This week our nation recognizes and honors small businesses. Give your own business the recognition and attention it deserves by protecting it and planning for the future.

Will your business still be in the family 400 years from now?

The answer to that is “not likely”. Statistically, Only 40% of family owned businesses survive to the second generation, 12% to the third, and 3% to the fourth. One reason for this might be lack of interest by subsequent generations, another might be the evolving market and economy, but one of the main reasons that family businesses don’t survive to the second and third generation is lack of planning.

Passing on the family business may be difficult, but not impossible, as this article about Shirley Plantation in Charles City, VA shows. Shirley Plantation has been in the same family for almost 400 years, and is still going strong. The reason for this success, says Charles H. Carter, the current executive director of the plantation, is that the family has planned for the future each step of the way.

Business succession planning is a key element to owning your business at any step of the game, not just at retirement age. This is because it is not merely about exit strategy, but about making goals and planning for future success. And leaving the business to your children is not your only option. You may decide to sell your business, or leave it to a partner. The options are out there, if you only know where to find them.

That’s where your estate planning attorney comes in.

Whether your business is in its first generation or its fifth, whether you intend to pass it down or sell, planning is essential if you want your business to survive. Your estate planning attorney can help you do just that. Whether through wills and trusts, or the succession planning described in this blog, it is our business to look to the future. Trust us to help you do the same.