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Charlotte Amalie
Saturday, May 18, 2024
HomeCommentaryOpinion: Towards Successful Family Business Transitions

Opinion: Towards Successful Family Business Transitions

Over the recent holidays, I heard a prominent Virgin Islander lamenting about the gentrification of our historic towns. According to the Merriam-Webster Online Dictionary, “gentrification a process in which a poor area (such as our towns) experiences an influx of middle-class or wealthy people (usually white mainlanders) who renovate and rebuild homes and businesses, and which often results in an increase in property values and the displacement of earlier, usually poorer residents.” This phenomenon is steadily happening in our towns and it’s darn admirable what some people are doing. Overall, it’s good. But it’s not us. We are merely bystanders.

A few days later, I saw a post on social media by the same prominent Virgin Islander urging everyone to push back against the gentrifiers. The thought stayed ruminating in my head for several days wondering how one pushes back against people who come to our historic towns and see gems of opportunity around them going to waste and proceed to buy and develop the decrepit properties into beautiful business buildings and apartments. Oh wow! Great idea! But we (Us, local islanders!) should have done the same thing, long ago, but we didn’t! Those ugly eyesores had been there for decades. What held us back? We all heard about the family members squabbling about the estate. So, what held us back from buying? What were we afraid of? Was it lack of money? Is it a lack of vision? No matter how much I ruminated about these questions I could not come up with any definite answers.

Anyway, in the process of thinking, I thought about another related question that has always frustrated me over the years. It has to do with keeping our wealth and assets in our local hands. In other words, what can be done by native families and long-term residents, who now own thriving businesses and properties, to keep the businesses growing and in the hands of the family and avert business closures and loss of precious assets when the head of the family, becomes disabled or dies? I remember the once thriving popular locally owned businesses such as Brow Soda, Villa Morales, Plantation Club, Saint Croix by the Sea, and others, and then, poof! They are gone!

Commonsense tells us that ensuring the smooth transition of wealth and businesses within our community is necessary for the economic survival of our people. So, before the old man or matriarch of the family passes, the family should engage in careful planning and proactive measures. But that’s easier said than done. I have been told over and over that old habits and cultural hang-ups and deeply incrusted beliefs tend to block our people from being forward-thinking, logical, and doing the right thing. I remember Spike Lee making this point in his 1989 movie Do the Right Thing! Often, we don’t trust ourselves. We even distrust our own family members and children. You at times hear murmured comments from the old pop or mom such as: “I worked too hard to build this business to now turn it over to our lazy children who don’t lift a finger to help and are only anxiously waiting for us to croak. Hell no!” Countless times, we heard owners mutter these misguided sentiments. Of course, time passes and then one day the inevitable mortality angel arrives and there is another repeat sad story. The business quickly folds and there is no succession plan. “The hard-working old man didn’t trust anyone with his business.” Tragically, another locally owned business bites the dust and the business shutters and the divisive court fights begin in the long backed up list of cases at probate court. And there, traditionally it lingers forever.

Our islands have a sad history of prosperous businesses quickly going under when the head of the family passes on. This is true in every town in our territory. Oftentimes, no one was adequately prepared, and the family is suddenly left unprepared to continue business operations and maintaining the long-established businesses, and to even keep the other accumulated assets such as real estate in the hands of the family.

The story is repeated many times throughout our community’s history. The old guy died and left everything and there was no legal transfer or succession plan. Consequently, family disputes and vicious court fights erupted over the assets while properties remained frozen in limbo for years. What were once before grand and respectable properties quickly become vacant, abandoned, and unsightly, bush over-grown, littered properties left for decades to the battering elements of nature, hurricanes, feral animals, and vagrants to illicitly use and destroy.

One only needs to take a walk down the streets and observe the large number of eyesores and derelict properties in our midst that are boarded up or crumbling. We even know the names of these prominent families and former owners. The question is how can our people put a stop to this negative trend and instead ensure the smooth transition of businesses, properties, and wealth to the younger generations? How can we keep the wealth in our families in a manner that assures or enhances the possibilities of future growth and prosperity?

So, what are the answers?

It seems to me that our mentality about property and business succession and property transfers must change. We are not going to live forever! Perhaps a massive multimedia re-education is needed to change the “distrusting mindset” of our people. Such an effort must target our cultural pride and try to erase our negative sentiments that have held us back. The fact is that we can change the thinking pattern and stem the tide and begin to create and build and protect family legacies. We must inculcate our young and old to recognize our history of wealth and property loss and see what is possible in the future. A targeted multi-media community education campaign should be crafted for promoting the ideas of family business ownership and wealth propagation.

We must, where possible, shine the spotlight light and applaud those who have successfully passed on businesses and properties to heirs and averted the typical route of shuttering. MSI on St. Thomas and Bolke and Abramson Enterprises on St. Croix are examples of successful transitions to the younger generation. We must show what is possible with planning and forethought. This is clearly an effort that our university and the small business administration, our banks, our government, the Chambers of Commerce, and our locally owned media should undertake.

Locally owned businesses must hire and work with qualified legal and financial professional advisors with experience in succession planning to create succession plans for their businesses and assets. Succession planning requires clear decisions on who will take over the leadership roles and how ownership will be transferred. Families must also engage in comprehensive estate planning to minimize tax liabilities and facilitate the transfer of assets to the next generation. This may involve creating trusts, wills, and other legal instruments. Competent legal advisors with integrity can provide guidance on legal and financial aspects, ensuring a properly planned and smooth business transition before the inevitable emotional and confusing family moment comes when the loved ones cross over to the afterlife.

To help strengthen existing businesses and secure additional resources, owners must learn to form or create viable partnerships or alliances with other businesses or with reliable individuals within the community. Partnering and forming formal alliances is mostly unheard of among our community and it is most likely because of our same distrusting and stubborn mentality. But it is doable! Learning about building workable partnerships and pooling and leveraging resources to maximize buying and investment power is essential. The same goes for building strong relationships with existing business networks. Thoughtful networking can provide support, mentorship, and potential opportunities for collaboration and business growth.

Financial literacy would also help our families’ businesses and should be a mandatory subject in our schools. According to Google, “Simply put, financial literacy means knowing how to handle your money wisely. Many people struggle with financial literacy, even as adults. This is often due to misconceptions or a lack of understanding about what it entails.” And here is another definition: According to Khan Academy, “Financial literacy is the possession of skills, knowledge, and behaviors that allow an individual to make informed decisions regarding money.” Our young people must be taught about business ownership and about thinking big and far beyond the selling of meat patties and cakes for fundraising for sports trips or queen contests. Pride in business ownership must be driven into our culture. Our young people must recognize that politics is not a sustainable career and that government jobs, though laudable, are not enough for the economic health and growth of our community.

Family reunions should be about a little more than just beach parties, cookouts, and dominoes. At least a segment of the fun-filled weekend should be about building and propagating legacy and growing the family business. Perhaps forming a family leadership council to facilitate open communication and perhaps key decision-making among family members is an innovative thought. There should be disciplined discussions about providing and securing education and training for the young and not so young family members to ensure they have the business skills to take over the family business. This can include short term workshops, formal education, mentorship programs, and on-the-job training. The family business should not entirely depend on one person to prevent a single point of failure. Distributing responsibilities can also help in harnessing a variety of skills and perspectives.

Our communities should learn from other successful communities and families. We have seen years of foreigners come into our territory going house to house selling and building trust and relationships. Years later the same sweaty, tired smiling door to door peddler is the proud owner of the supermarket and gas station. You can’t help but admire their hard work, persistence, and determination to succeed.

At family gatherings time should occasionally be set aside to discuss serious ideas about innovative projects that others are pursuing in other communities. They should keep abreast of economic trends and changes in industry and technology to adapt these to the family’s business.

In today’s fast-moving world of commerce, using communication technology should help family businesses to remain competitive and resilient over time.

Family businesses should explore and test the possibilities of a family business website which is carefully monitored and protected and used to foster intra-family collaboration and teamwork among its members. This medium may be used to encourage open communication and problem-solving to maintain a healthy family and business environment. Why not?

Perhaps a thoughtful family credo or charter should be developed that clearly communicates the values, goals, and rules governing the family business. This family charter can help guide and focus decision-making and prevent disputes. The family website may also help document and preserve important processes and knowledge within the business. Clear and dedicated documentation ensures that critical historic information is not lost and can be passed down effectively.

Finally, fresh, “outside the box” thinking, careful planning, open communication, actionable community pride, and a commitment to long-term sustainability are needed to preserve our communities and to assure successful wealth and business transitions. Ultimately, this may be the only viable way to avoid the wholesale gentrification of our communities by others who capitalize on our self-neglect and lack of vision and lack of planning for our futures.

Carmelo Rivera, who has deep roots on St. Croix formerly worked at HOVENSA for Turner St. Croix Maintenance, Inc., a major contractor, as head of public affairs, HR, and labor relations. He is a former University of the Virgin Islands HR and Business Instructor, a former USVI Department of Labor commissioner and acting commissioner of DPNR. He served as president of the St. Croix Chamber of Commerce and as chairman of the Hospital and Health Facilities Corporation. He currently lives in Orlando, Florida with his wife, Nilsa Belardo, and returns frequently to St. Croix, his childhood home where he was raised by his humble Vieques family.

 

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