Tips for succession-plan procrastinators - Crain's New York Business

Mitchell Kaneff, chief executive of Arkay Packaging in Manhattan, took over his family's business in 2004 after a seven-year transition from his father. He joined the company at age 15, spending summers working alongside employees involved in jobs such as packing, before he earned a B.S. in printing management and sciences from Rochester Institute of Technology. After his graduation, his father began grooming him to take over. Today, Arkay Packaging generates $50 million a year in revenue by providing packaging for products from Oil of Olay to NyQuil.

In January, Mr. Kaneff released Taking Over: Insider Tips from a Third-Generation CEO, a guide to succession planning. About 98% of corporate executives believe that succession planning is important, yet only 35% have a succession plan in place, according to a recent survey by the Korn/Ferry Institute.

Here are some of Mr. Kaneff's tips:

1. Plan early. “Start succession planning a minimum of five to 10 years prior to the next generation coming into the business,” advised Mr. Kaneff. Sometimes, the process may get stalled, so it is important to build in extra time.

2. Get an outside perspective. Making decisions about succession can be lonely, so it helps to have a sounding board outside of your family or colleagues. “We brought in an industrial psychologist,” said Mr. Kaneff.

3. Know the value of your business. Whether you plan to sell the business or pass it along to heirs, it’s important to know what it’s worth. Mr. Kaneff recommended getting advice from an estate planning lawyer, an accountant with experience in estate planning, a third-party appraiser and perhaps an insurance expert. The IRS tends to look askance at the use of a personal accountant to figure out the value of a business.

4. Transfer shares when their value is down. Recessions can be an ideal time to transfer shares of the company to heirs. If you do so at a time when the company’s valuation is at a low, you’ll reduce the taxes that the recipients owe. “If your profits are down and the business has taken a big hit, one door shuts and another one opens,” Mr. Kaneff said.

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