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Plan to pass your business on
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October 1, 1996: 2:16 p.m. ET
Henson Productions weathers founder's death in transfer to second generation
From Correspondent Jill Brooke
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NEW YORK (CNNfn) -- Jim Henson may have created Kermit and the Muppets, but he failed to design a succession plan for his business.
When he died in 1990, his five children faced a common problem. Since two-thirds of about two-thirds of second-generation businesses fail, who would run the $150 million company?
They created an advisory board, including trusted outsiders, to draft the plan.
"I think it's crucial that there be a family advisor who was close to running the company; who the family can trust, and who can guide discussions," Brian Henson said. "That was probably why it happened so smoothly."
Henson now runs Henson Productions, which includes TV series, a 15-picture movie deal and merchandising. The siblings split the assets equally.
Of the 20 million family businesses in the United States, only one-quarter have written succession plans. For passing the torch to the next generation, family business experts offer several suggestions:
- Encourage your children to work elsewhere before joining the family business.
- Put children in positions that complement their skills.
"They can't learn two skills, join the family business and feel that they have permanent employment and think they're set for life," said Marcy Syms, president of Syms Stores and author of "Mind Your Own Business."
Brian Henson produced three films outside the company to build up his reputation, for example.
"I found that invaluable," he said. "Everybody would treat you in a certain way because of who you are and not what you've done. It would be impossible to grow or know what your strengths are in that environment."
- Also, discuss who will take over and prepare to face estate taxes.
"The state estate tax is a tremendous headache," said Arthur Langhaus, managing director of KLS Professional Advisors Group. "It turns the government into a 55-percent partner in business, and the best way to solve the problem is get insurance."
Careful planning can ensure that the family business survives. Henson productions, for example, is now worth $300 million.
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