International Door & Operator Industry

NOV-DEC 2015

Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.

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upward opportunities that may no longer exist under the new regime. Thus, succession planning is not just a one- time thing – it has to be factored into every potential hire or contracting decision, if only to avoid creating obligations in the future. Protections for Those Not Picked When a family business is passed from one generation to the next, there usually aren't any legal issues regarding the selection of the successor. However, when anyone else is involved, management must take care not to violate the laws prohibiting various types of discrimination. The biggest discrimination risk in succession planning is avoiding age discrimination. The Age Discrimination in Employment Act ("ADEA") prohibits discrimination in the workplace against persons age 40 and above. Thus, if the new chosen leader is under 40, and that person is picked over someone who is older than 40, the potential for a discrimination claim exists. The risk becomes magnifed if statements are made as part of the transition about bringing in "new blood," "youthful energy," the "next generation," or the like. Where the older candidate has the same or better qualifcations as the younger one, those statements can act like red fags for discrimination, even if none was intended. Similarly, to the extent there is any sort of competition for the leadership positions, the employer must be careful to follow non-discriminatory promotion practices in the same way as hiring new employees. Appropriate outreach to female or minority candidates is important, as is making sure not to develop criteria that have a discriminatory impact. Also, to the extent that door industry experience is not essential to an aspect of the leadership position, experience in other sectors or even other industries should not be unnecessarily diminished in a way that could discourage or screen out categories of candidates. Putting It On Paper Regardless of when the transition occurs, it is always best for it to be not just planned, but for the plan to be documented in advance. Particularly because some transitions happen suddenly, because of unexpected death or incapacitation, a detailed written plan is a best practice for ensuring the future of the business. LEGAL&LEGISLATION Continued from page 13 14 "The most common methods of valuing a business are by agreement between the buyer and seller, or through the valuation of a third party professional. Although it is more expensive to use a professional, the price arrived at by the professional is more likely to withstand scrutiny by a court or taxing agency." International Door & Operator Industry™ Continued on page 16 Valuing the business involves measuring not only the tangible assets (tools, equipment, vehicles, land, inventory, and accounts receivable, among others), but also the intangible assets (customer lists, intellectual property, and the "goodwill" of the company name). Obviously, it is easier to fgure out the fair market value of things which are commonly bought and sold, so arriving at a price for the intangible assets is likely to be the tougher task. The most common methods of valuing a business are by agreement between the buyer and seller, or through the valuation of a third party professional. Although it is more expensive to use a professional, the price arrived at by the professional is more likely to withstand scrutiny by a court or taxing agency. For this reason (among others), it may be worth including a professional valuation as the proper method for developing a price for the business in the transition plan. After getting the price, the plan also needs to establish when payment is made. The departing owner will always prefer getting paid up front, in cash, but especially if the incoming leadership is a rising manager, he or she may not have the liquid assets (or even the credit to obtain a loan) to pay for everything all at once. Therefore, if the acquisition is going to include a payment plan, other details need to be included. These may include installments, interest, personal guaranties or other securities from the purchaser, and/or the opportunity to retake the company if the buyer breaches the purchase agreement. Promises Made Must Be Promises Kept Anyone who is not going to be the new owner or leader has the potential to be disgruntled. This is the nature of any succession event. If there have been expectations raised among those disappointed individuals, though, the result can be litigation or sabotage. With most employees, the employment relationship is "at- will," which means that person can be fred without cause, and similarly the employee can leave without obligation. For more signifcant workers, the company may have entered into written contracts which are harder to break. This can matter if the incoming leader wants to dismiss a contracted employee. It can also matter if that employee was promised leadership training, promotions, or other

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