Massachusetts Family Business Spring 2014

Massachusetts

SPRING 2014

FAMILYBUSINESS PERFECTING THE FAMILY BUSINESS SONATA M. STEINERT & SONS’ EIGHTH GENERATION IS PLAYING A NEW TUNE

Official magazine of the

Inside:

Keeping The Cash Flowing

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Massachusetts Family Business Official magazine of the

CONTENTS

8 SEVEN GENERATIONS OF STEINWAY SALES Family business M. Steinert & Sons has seen a lot of changes during its 150 years in the piano business, but family remains a top priority.

4

5

from the board

Upcoming Events For Family Businesses

keep the money flowing

Cash Flow Is The Oxygen Of A Small Business: Tips To Keep Yours In The Red

6

health care in the future

Savvy Next-Generation Managers Are Already Planning Ahead To Reduce Employees’ Health Care Costs

12 passing the baton

A Neutral Third-Party Can Help Defray Tensions When The Business Changes Hands

6

8 ON THE COVER: Steinert employees, left to right: Stephen Dawe, general sales & marketing manager; Vivian Handis, Marianne Jensen, and Liz Diamond, piano consultants; and Brendan Murphy, director of institutional sales.

12 3

Letter from the Board

The FBA Roster of Events – Looking Back, Looking Ahead

A

fter a wonderful, busy year in 2013, you might think the Family Business Association would need a breather before jumping into 2014 programming. However, we decided to maintain the momentum. We continued to support and educate family businesses by kicking off the new year with two very well attended educational events.

In January, the FBA and Enterprise Bank welcomed guests for a discussion on generational issues faced by family businesses. The dinner was hosted by a 2011 FBA Award Winner, China Blossom Restaurant of North Andover.

General Manager David Yee not only provided an excellent meal and beautiful accommodations, but also joined our panelists and shared his own experiences in running a family business.

On March 6, Wellesley Bank hosted “What Glass Ceiling? Why Women Excel in Family Business” at their offices in downtown Boston. Panelists included Kimberley Abare of New England Die

Cutting Inc. and Erin Erler of Cakes by Erin, both 2013 FBA Award finalists. The event was immensely popular, proving that the topic was on the minds of many family business members in the Boston area.

Lending further support to family businesses, the FBA will join Cape and Plymouth Business for their Business Expo on April 10, at which we will host a breakfast to announce the formation of Family Business Peer Groups. Additionally, in another prestigious partnership, the FBA, The Warren Group, and the Jewish National Fund will present the second annual New England Family Business Conference on June 19 at the International Golf Club & Resort in Bolton. This year’s two-day event will kick off with an afternoon golf tournament and dinner honoring the Blank family on June 18. We look forward to bringing family business owners and executives together to meet and share their experiences.

Other 2014 events include “Securing Wealth for Future Generations,” hosted

in Boston by Bernstein Global Wealth Management, “Leadership in the Family Business” presented with the Southern New England Entrepreneurs Forum and the University of Massachusetts Dartmouth, and “Preparing the Next Generation,” a breakfast in Rockland.

Finally, we are excited to announce that the 2014 Family Business Association Awards for Massachusetts will be held on Oct. 23, 2014, at the Royal Sonesta in Cambridge. Applications are due on Aug. 15 and nominations are due by Aug. 1, so make sure to visit our website as soon as possible to fill out the online nomination form and show your support for your favorite Massachusetts family businesses!

For more information about any of our events, please visit www.fbaedu.com. ■ ED TARLOW JEFFREY DAVIS AL DENAPOLI

BRIAN NAGLE FBA EXECUTIVE DIRECTORS

Massachusetts

FAMILY

Editorial | Advertising | Design

Official magazine of the Family Business Association. Inc.

A Family-Owned Business Since 1872 DIRECTORS 101 Huntington Ave., Suite 500 Boston, MA 02199 fbaedu.com

Jeffrey S. Davis, Mage, LLC Al DeNapoli, Tarlow, Breed, Hart & Rodgers, P.C. Brian Nagle, First Republic Private Wealth Management

VICE PRESIDENT Catherine Watson, Tarlow, Breed, Hart & Rodgers, P.C.

TREASURER PRESIDENT Edward D. Tarlow, Tarlow, Breed, Hart & Rodgers, P.C.

Richard A. Hirschen, Gray, Gray & Gray, LLP

EXECUTIVE COORDINATOR Liz Pratt

4

280 Summer Street, Boston, MA 02210 Phone 617-428-5100 Fax 617-428-5119 www.thewarrengroup.com ©2014 The Warren Group Inc. All rights reserved. The Warren Group is a trademark of The Warren Group Inc. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher.

Cash Flow Tips for Family Businesses

By Frank Armenio

S

mall-business owners or managers occasionally place too much emphasis on top line sales, gross revenues, or net income and don’t spend enough time managing cash. Think of it this way – revenue is food, profit is water, and cash is oxygen. Your business will not survive without any of these three components. What can you do to enhance your oxygen – your cash flow? Increasing your revenue stream and reducing expenses are no-brainers, but there are other strategies.

Bill early and often. Invoice your customers or clients as quickly as possible.

The sooner that you get invoices out the door, the faster you’ll receive payment.

Many service businesses invoice monthly.

If it is practical, invoicing clients on a weekly basis could substantially increase cash inflows.

Offer payment incentives. Discounts for early or prompt payment should be considered. However, be careful that your customer base doesn’t take the discount and still extend the payment. Discounts are a popular marketing tool to encourage clients and customers to pay faster, and many suppliers offer them.

Consider factoring accounts receivable when traditional bank financing is not an option. Factoring will get you the working capital you need now and increase your cash flow. Typically, 75 percent to 90 percent can be advanced against the invoice you generate, and the lender will pay you the balance of the invoice, less their fee (typically 2 percent to 5 percent) when your customer pays the invoice in full. Factors are companies that specialize in buying accounts receivable.

In exchange, factors pay a discounted value of the receivables to the company selling the receivables. Factoring helps

businesses to avoid the loss of business to competitors who seem to have better cash flow. There are many factoring companies in the United States, so you should be able to negotiate better rates.

Accept ACH or credit card payments. Offering your customers the ability to pay their invoices via credit card will enhance your cash flow and likely increase your revenues.

You get cash almost immediately (minus the credit card processing fees) and your client still gets terms more favorable to their cash flow. Because there are thousands of credit card processors, you are in a position to compare and negotiate processing rates and equipment rental fees.

Avoid slow pay/no pay customers. The best way to avoid cash-flow problems is to weed out prospective clients or customers who are slow pays/no pays out before they become clients. Do your homework. Ask for – and check – credit references of prospects. You might even pay for a credit check from an organization such as Dun & Bradstreet.

Consolidate your loans. If you have more than one loan related to your business, you should review your interest rates and consider consolidating your loans into one. Chances are, you can get better interest rates and terms that reduce your monthly loan payments, thereby reducing your cash outflow.

Pay for fewer business meals and give more gifts. Most small business owners probably don’t realize that only 50 percent of the cost of their business meals is deductible, while the full

amount of any gifts that you give can be expensed.

So instead of taking your clients or employees to lunch, give them a gift.

Have a cash flow model. This can’t be stressed enough. Most successful businesses have a cash flow model in place. Typically the model allows them to project their cash flows a year in advance on a month-by-month basis. Businesses whose cash flow is really tight should update their cash flow model on a weekly basis. Simply reviewing your cash flow projections on a consistent basis will give you pause, and cause you to consider ways to increase top-line revenues and bottom-line profits.

■ FRANK ARMENIO IS A PARTNER AT B2B CFO. 5

Next Generation Managers Prepare for Health Care Changes

By Jim Edholm

A

s the next generation of Massachusetts business owners looks forward to their stewardship of the family business, many are concerned about the costs and responsibilities of health care – and they should be. The Affordable Care Act (ACA) is here. It won’t hurt as much in Massachusetts as in some other parts of the country, but the simple fact is the ACA adds 2 percent to 5 percent to the cost of covering your employees. Two percent is a direct premium tax; the other, up to three percent, is a result of added coverage requirements. Pediatric dental, for example, adds one to two percent depending on the U.S. Census data of the policyholder.

And most businesses plans are “so yesterday,” in today’s parlance, meaning that they’re either copay plans or lower deductible plans, but that they don’t allow savings incentives on the part of employ6

ers or employees through the offering of a voluntary contribution, voluntary-purchase financial instrument, such as a taxdeferred Health Savings Account (HSA).

Many new, young, innovative owners are willing to evaluate different alternatives.

HSA Plans as an Answer One of the most popular alternatives to “traditional” health plans is the HSA. It’s unique for several reasons. First, it’s low cost compared to most traditional plans.

Why? Simple: High deductibles offer a way to reduce the insurer’s exposure. If an insurance carrier is going to pay for your doctor’s appointment, or your prescription or your lab or x-ray (other than a small copay), they have to collect enough premium to pay for it.

But if they can defer their obligation until you’ve incurred $1,500 to $3,000 worth of claims before they pay anything,

they clearly don’t need to collect as much premium. And they – and you – get a second benefit from the HSA. If an employee is responsible for those first claims dollars, no surprise – they have the opportunity to become a better, smarter shopper. Lack of consumer involvement in the cost of health care shopping process is one of the leading reasons for high (and growing) health care costs.

If all I pay is a fixed dollar copay irrespective of where I receive my treatment, I’ll choose the hospital, clinic or doctor on a basis other than cost.

However, if I’m sharing in the cost, I may shop around. For instance, a primary care doctor specifies certain lab and xray tests. Some insurance brokers prepare customized, individual directories for clients that are arranged by zip code and list every free-standing lab and radiology facility within four miles of each employee’s

zip code. The employee can then search for the facility with the lowest cost. How much difference can it make? A client story is illustrative. This family business had a high deductible plan, and a nextgeneration owner needed an x-ray. At the hospital that his doctor used – a community hospital, not a teaching hospital – the cost was going to be $470. The individual shopped and found that a local free-standing radiology facility would perform the same service for $170 – 36 percent of the cost of the hospital-provided service, and offered an additional discount for cash payment.

This happens all over. A January study reported in the The Wall Street Journal estimates that one-third of all Massachusetts health care costs are wasted. HSAs can’t eliminate all of that waste, but they can certainly play a part.

Other Benefits of the HSA There are two parts to an HSA. The first part is a high deductible health plan, and the second part is a savings account that the employee is allowed to establish because she has a high deductible health plan (this must be documented by the employer). The employee (and/or the employer or both) can contribute up to $3,300 for a single coverage employee and $6,500 for a family coverage employee in 2014. This amount is allowed even if the deductible under the employer’s plan is lower than those amounts – and most are.

That money in the HSA account is the employee’s to manage – and to keep, even if she moves on to another employer.

If she doesn’t incur a claim, or if she spends less than she otherwise would, she gets to keep the unspent money.

It rolls over from year to year and ac-

cumulates – with interest. So in addition to achieving savings via the “stick” of her fear of loss and out-of-pocket payment, the HSA plan also offers the “carrot” of keeping the savings and letting it build up in her account.

Better yet, not only does the amount carry over from year to year, any contribution to the account – either by the employee or the employer – is tax deductible.

And if you want some whipped cream on your benefits pie, the contribution is deductible by any contributor, irrespective of tax status. So the partner, sole proprietor, LLP owner, S-Corp owner, or CCorp, LLC or any variation thereof gets to deduct the contribution. That’s a big advantage for owners of many company structures.

That’s not all. The money from the HSA can be used for dental (deductibles, copays, coinsurance and uninsured dental costs). It can be used for eyeglasses, massage therapy, acupuncture … a whole boatload of other alternative health solu-

tions. It’s a plan for all seasons and reasons.

Small Group Strategies Smart business owner have discovered something else. I mentioned above that employers can contribute to the employees’ accounts. Think seriously about doing that. Most employers don’t, but those that do know that they’re not only reducing the employee’s risk via the contribution, but they’re also offering a benefit that few of their competitors do. So maybe they will find that turnover drops and productivity increases and they beat their competition.

That’s a smart solution for forwardthinking, next-generation business owners. ■ JIM EDHOLM IS PRESIDENT OF BUSINESS BENEFITS INSURANCE (BBI), AN EMPLOYEE BENEFITS PLANNING FIRM IN ANDOVER, MASS., AND AUTHOR OF THE BOOK BUSINESS IS A LARGE TARGET: THE BUSINESS OWNER/CEO’S COMPLETE GUIDE TO MAXIMIZING RESULTS (AND PROFITS) FROM HR AND EMPLOYEE BENEFITS.

BOARD MEETING?

Call Ed Tarlow, Chairman of the TBHR Family Business Practice at 617-218-2000, ext.

2011, or via e-mail at: etarlow@tbhr-law.com

We have assisted hundreds of family business owners over the years. Our experience and knowledge can help guide your family business toward a successful and profitable future.

Family Business Practice 617.218.2000 www.tbhr-law.com 7

M. Steinert & So is Practicing for the Generation of Family Le

Left to right: Jerome Murphy, Brendan Murphy and Paul Murphy Jr. 8

By Steven Jones-D’Agostino

ons e Next eadership

Photo courtesy of Nate Tia

O

ne of the biggest challenges for any family-owned business is settling familial feuds. At Boston’s M. Steinert & Sons, Paul Murphy Jr. reveals with a hearty laugh, “That’s interesting, because that comes up every day!”

But the Murphy clan usually finds a way to resolve them, with Paul Jr. usually playing the role of peacemaker.

His daughter, he recalls, once told him, “You’re like Switzerland.”

The key, according to Paul Jr., president of the seventh-generation company, is to have “faith and trust in the siblings that you work with, which we do.” Another, he says, is to share duties with those same siblings, which they also do.

M. Steinert & Sons Co. Inc. has been owned and operated by three generations of the founding Steinert family and four generations of the subsequent Murphy family. The current generation consists of Paul Jr., his brother, Jerome III, and Paul Jr.’s son, Brendan, who is being groomed to eventually take over the 154-year-old firm.

Under both the Steinert and Murphy families, M. Steinert & Sons has a long history of supporting and serving the music community of New England – and well beyond. Two of its most famous customers have been pop star Elton John and supermodel Gisele Bundchen.

Along the way, the Murphy family, which has solely owned M. Steinert & Sons for 80 years, has fought through the ups and downs of the economy to emerge as the strongest – and one of the only – remaining piano dealers in the region.

Last fall, the company’s largest competitors, Boston Organ & Piano, shuttered its doors after 56 years in business The Loss of Piano Row In its heyday in the early 20th century, M. Steinert & Sons had 42 locations throughout New England and New York.

The advent of online retail has been a factor in paring that number to only two – both in Massachusetts.

The company has its main store in Boston and, since 2011, a store in the upscale Natick Mall that is now being expanded.

The Worcester store – which opened in

1872, eight years before the Boston store – operated for 137 years, closing in 2009.

Paul Jr. worked at M. Steinert during summers while attending college, going to work full-time there upon graduation in 1969. Back then, Boylston Street was the Piano Row of Boston, with five other companies selling pianos and ancillary equipment and supplies. Steinert Hall, a magnificent underground concert hall, is part of the M. Steinert & Sons complex on Boylston Street.

Today, M. Steinert & Sons is the last piano store on Piano Row still standing.

Most of the other buildings having been taken over by Emerson College. While Emerson is the nation’s only four-year college devoted exclusively to the study of communication and performing arts, few of its students are in the market for pianos. On occasion, Emerson itself buys pianos from M. Steinert & Sons. The loss of Piano Row, beginning in the ’80s, Paul Jr. says, did “take retail aspect off the street quite a bit.”

In the digital age, anyone can now download a keyboard app, which M. Steinert & Sons also sells. But they can’t yet download either a custom-made acoustical (or analog) piano – which remains the company’s bread and butter – or a custom-made digital piano. And a custom-made analog piano still sounds much better and richer than its digital sibling.

Most Steinert customers buy pianos for themselves and their family. A big business surge at Christmas has been largely replaced, Paul Jr. says, by “people who are actually qualified to play – and they [do] play.”

M. Steinert & Sons also makes a market in piano lessons, with several instructors teaching about 300 students a week – many of them adults – at its Boston location. The remarkable 20,000-squarefoot complex includes teaching studios, retail space and a piano repair shop.

Occasional family disputes aside, the big challenge facing M. Steinert & Sons is whether to stay in downtown Boston.

As Paul Jr. points out, “Very few of our type of piano companies are in the downtown area anymore. And they all used to be, all across the country. So we wonder 9

M. Steinert & Sons Continued from page 9

if we shouldn’t be out somewhere in the suburbs – maybe with more than one location in a suburban area – and surrounding Boston rather than in Boston.”

Send over Your Best Guy M. Steinert & Sons is the second-oldest Steinway piano dealer in the world, and its Boston location is the oldest continuously existing music store in America. The company was founded in 1860 in Athens, Georgia, by Morris Steinert, who emigrated from Bavaria in 1850. (A full accounting of the history of the company can be found on its website, www. msteinert.com.)

The company was granted the Steinway agency in 1869. The business expanded over the next three decades, opening stores in most major New England cites with the help of Morris’ seven sons, who joined the business.

Jerome Murphy III and Paul Murphy Jr.

In 1897, the Steinerts and Murphys first teamed up. Alexander called Bryant and Stratton National Business College and asked them to “send over your best guy.” They sent over 16-year-old Jerome Murphy, the son of Irish immigrants,

whom Alexander hired as an intern bookkeeper for $6 a week. He would rise to become the company’s treasurer.

The company started manufacturing its own pianos in 1901; two years later, it bought out two other manufacturers,

For Steinway, Steinerts Carry on the Family Legacy World-renowned piano maker Steinway & Sons has been doing business with M. Steinert & Sons since 1869, making it one of the oldest such relationships in ANTHONY GILROY the piano business.

“You don’t get much more stable than [144] years,” Todd Sanders, Steinway’s vice president of sales and marketing, says of Steinert.

He cites Steinert’s “incredible legacy”, both in terms of the company and its management.

The 160-year-old Steinway bills itself as “dedicated to making the finest pianos in the world.” The New York City-based firm, which is no longer family-owned, crafts about 2,500 pianos per year worldwide, handcrafted at its factories Astoria, New York and Hamburg, Germany, using many of the same techniques as company founder, Henry Engelhard Steinway, a German immigrant who founded the company in 1853 in a Manhattan loft.

10

Steinway generates more than $100 million in annual revenues and has been profitable throughout the Great Recession. It employs about 900 employees worldwide, most of them in the Americas. (Several hundred people work for Steinway’s Conn-Selmer band division.

In 2013, Conn-Selmer and Steinway changed from public companies to private ones when Paulson & Co. became the new owner.)

Steinert differs from most other Steinway dealers, Sanders says. “[I]t’s more of an institution than a retail store. … They’re part of the fabric of Boston – they’re just steeped in the community. I view them almost more as a community center than a piano store. As far as serving the artistic community, that’s what they’ve been doing since 1860. So they’re not a strip-mall type of store.”

Very few Steinway dealers also have a brand as strong as Steinert’s, according to Anthony Gilroy, Steinway’s director of marketing and communications. “Steinway, of course, is a worldwide brand so everybody around the world knows what

Steinway & Sons is,” he says. “But when you get into Boston, I think if you mention M. Steinert & Sons, it’s kind of on the same level as Steinway.”

“They’re able to have a lot of success,” Gilroy adds, “and they rely on their own brand name in addition to the Steinway name.”

Other than to stay the course, Sanders and Gilroy have nothing to recommend to Steinert, except to carry on representing the Steinway brand for the companies’ mutual successes. “Legacy is great,” Sanders points out. “But legacy only lasts so long if performance is down. Thankfully, that hasn’t been the case with Steinert.”

All of Steinway’s more than 70 dealerships are family-owned – the company also owns factory stores in a dozen major markets. Not all of the Steinway dealerships, though, have been operating for as long as M. Steinert. “When your father and your grandfather worked so hard to either start or maintain a business,” Sanders says of the Steinerts, “it keeps a real sense of pride within the family that they’re carrying on the legacy of their father and grandfather.”

both based in Leominster. Morris died in 1912, leaving the business to his sons, with Alexander in charge. The company subsequently survived what was determined to be a misappropriation of funds by a key employee in 1916, in an apparent bid to take away the Steinway franchise; some of the funds were returned and the company recovered.

Jerome was soon appointed general manager. Several of the next generation of Steinerts joined the firm in the following years. Among the Steinerts’ endeavors was the Eastern Talking Machine, established in 1916, a distributor for the RCA Victrola. In the 1920s it distributed radios in the 1920s, offsetting the decline of player-piano sales.

But the Wall Street crash of 1929 caused the company to lose money on all fronts. It began buying back leases, closing stores and generally tightening its corporate belt. In 1932, the Leominster factories ceased operation and those properties were sold.

Organ sales and Steinway grand pianos contributed to the newly reorganized company’s success. During World War Two, Jerome Jr. served in the Army, and Paul Sr. in the Navy, as Jerome Sr. ran the day-to-day operations. Jerome Sr. also became the first “outsider” to be elected a director of Steinway & Sons.

After the war, M. Steinert & Sons expanded its radio and phonograph sales, and began selling TVs in the late ’40s – around the time WBZ Channel 4 went

on the air as New England’s first commercial TV station.

With the passing of the first two generations of Murphys, two of Paul Sr.’s sons continue the family tradition. Paul Jr. came aboard in 1969 and Jerome III in 1978. A fourth generation of the Murphy family, Brendan (Paul Jr.’s son) entered the business in 2005, and the following year, became its director of institutional sales.

Continued on page 14

The Emergence of a New, Leaner Company Alexander died in 1933 at age 72, leaving the company insolvent and with no heir-apparent. In 1934, faced with foreclosure, Jerome, along with partners Robert Steinert and Alfred “Jed” Prouty, the Springfield store manager, acquired the assets of the company from three major Boston banks. A new, leaner company emerged with a concentration on retail piano sales. Gone were 39 of the 42 stores that had operated in Steinert’s heyday, as well as the two factories. But the company survived.

M. Steinert & Sons became the second Hammond Organ dealer in the country in 1935, an enterprise that did well under the direction of Jerome Jr., a trained organist and pianist who had joined his father in the firm in 1932.

In 1936, Robert Steinert sold his interest in the company to Jerome Sr. Two years later, Paul Murphy Sr., Jerome Jr.’s younger brother and Paul Jr.’s father, joined the firm. Paul Sr., a Harvard-educated lawyer, shared his own father’s solid business sense, which complemented his own brother’s musical abilities.

Between 1934 and 1941, Hammond

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HANDING OVER THE REINS OF A FAMILY-OWNED BUSINESS

By Kevin White

T

he desire to pass the legacy of a family business from its founders to the next generation is widespread, but so are the challenges as leadership changes hands. Both generations have respective strengths that can benefit any business, but generational differences can lead to conflicts as the young take on greater leadership roles.

Members of the seasoned generation possess a focused understanding of their industry and their customers. Their loyalties run deep. They are self-taught and have KEVIN WHITE learned an enormous amount from past missteps. They are committed to hard work and exercise extraordinary patience to obtain results.

However, the veteran generation does not easily embrace change, struggles with delegating authority (especially to their children) and is reluctant to take risks with an established business. The factors that perhaps stand out as the greatest stumbling blocks for this generation are technology and social media. They are rightfully protective of what they have created, often through great sacrifice.

The younger generation offers its own formidable set of credits and debits. This emerg12

ing group is highly adaptable, overflows with new ideas and demonstrates nearly limitless energy. They came of age with technology and social media and view them as integral parts of any endeavor. In a constantly changing business climate increasingly reliant on technology, these skills are essential.

This rising group, however, is still learning to navigate the business world. While they are generally flooded with creative, forwardthinking ideas, they are less experienced in aligning those ideas with the company’s strategic goals. The only world they have ever known moves fast, making them less likely to plan long-term. Furthermore, this generation tends to seek more flexible work hours, a preference that can clash with their parents’ routines.

These differences do not preclude a generational transfer of leadership; it just involves additional effort. Below are recommendations for creating a bridge to preserve the senior executives’ achievements, while paving a path to innovation and technology that is an integral part of the younger generation’s culture and experience. Enlist the assistance of a qualified independent consultant. A neutral third party is not influenced by familial ties and can provide an objective review. As both generations undertake the assessment of people, process, technology and best practices, they become united in their understand-

ing. Skipping this controlled review is likely to result in hit-or-miss decision-making that leads back to generational conflict.

Invite younger protégés to attend strategic meetings in which the seasoned generation shares their industry knowledge and can instill an appreciation for building top talent.

Younger counterparts can outline the need for upgrading technology and using social media. Engaging the younger group in the current business culture establishes an intergenerational rapport that serves as the foundation for future transition. Delegating responsibilities to the younger generation – and allowing them to make mistakes – is important to achieving this goal.

Ask your CPA firm to guide the company through the current state of the business’ finance. A fresh look at the financial statements helps younger management understand how information is processed and what controls are in place. It is imperative that they see how core areas are interconnected and built around the company’s strategy so that they gain greater awareness of priorities and resources.

Encourage the younger group to enroll in an accounting course in order to fully understand financial statements. This exercise may also expose the younger generation to new accounting software programs that might be viable upgrades to the business’ existing – and possibly outdated – programs.

Embrace outside experience that younger generations can gain. Learning from a business mentor or working at another organization with no connection to the family business can be useful ways for future leaders to broaden their perspectives. Gaining additional experience will help younger generations bring in fresh knowledge and insights that the company might have otherwise lacked.

If both generations are honest about their strengths and weaknesses and willing to take steps to lay the groundwork for a successful transition, then the generational gap closes and development of an effective succession plan becomes possible.

■ KEVIN T. WHITE, CPA, IS A PARTNER AT BLUMSHAPIRO.

Presented by:

In Partnership with:

In Conjunction with:

Presenting Sponsor:

Supporting Sponsors:

Massachusetts Family Business magazine, the Family Business Association and The Warren Group are dedicated to honoring and educating family businesses throughout the region.

On June 18 and 19, owners, CEOs, managers and founders of family businesses from the region will gather at The International Golf Club and Resort in Bolton, Massachusetts, for the second annual conference dedicated to family businesses. A diverse audience will be there to network with peers, gain valuable business insight and ask pressing questions at various educational sessions.

CONFERENCE REGISTRATION HIGHLIGHTS! • Choose the breakout sessions you want to attend.

• Hear from industry experts and experienced family business owners.

• Expand your network and learn from peers.

• Enjoy breakfast and lunch with other conference attendees.

• Choose to mix business and pleasure with the optional JNF golf tournament and tribute dinner.

• Outstanding Women of Family Business Awards.

• Free subscription to Massachusetts Family Business magazine.

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13

M. Steinert & Sons

Paul Jr., they can easily do each other’s job.

The apparent harmony that pervades Today, M. Steinert & Sons is netthe Murphy family members involved profitable and thriving, with 22 fullwith the business is the main reason they time-equivalent employees. Revenues lack a written business succession plan. for 2013, which the company declined to “We could use one of those [plans],” Paul publicly disclose, were up about 12 perJr. says, adding, “It’s not necessary, probcent over the year before. ably.” Although, he adds, “Our suppliers New pianos – both analog and digiwant to know what our plans are.” tal – constitute about 80 percent of M. Even though Paul Jr.’s father practiced Steinert & Sons’ current product mix. law, he thinks his dad would agree the While the company does not sell today’s company doesn’t really need such a docversion of the radio – digital music playument. The family, he recalls, has always ers – it does give them away to customers liked to do business with each other on a who buy digital player-piano systems. In handshake. a real sign of these digerati times, those The Murphy family is taking steps in customers also get a free iPad. the succession-planning direction, having just promoted the 32-year-old BrenThe Setup for Transition is dan to vice president. “So he’s [now] an Already in Place officer of the company,” Paul Jr. says, Decades ago, Jerome Sr. ran the busi“which makes a significant difference ness side of the company and Paul Sr. the in his stature here. He can now sign lesales side. Today, the Murphy clan congal documents, for example. That’s just tinues to divide responsibilities, while pragmatic stuff, but it’s also recognition also sharing duties. Jerome III operates of his success here.”

BlumShapiro 7.5 xand 5_Layout 1 8/19/2013 the businessAdside Paul Jr. the sales 2:57 PM AsPage Paul 2Jr. notes, Brendan “had a great side. But on any given day, according to selling background,” having worked in a Continued from page 11

travel agency, where he outsold the more than 30 other travel agents, before joining the family business nine years ago.

“When Brendan came here, he said he knew how to talk to institutions, teachers and scholastics,” he says. “So we put him into institutional sales here and he’s been very successful – he’s our top guy.”

As a result, Paul Sr. says of M. Steinert & Sons, “We’re not going to go public, and I doubt if we’re going to sell it. I think the setup for transition to the next generation is already in place.” When could that happen? “That’s a good question,” he responds, noting that he’s 68 and his brother is 62.

Still, Paul Jr. reports that both he and Jerome III are relatively healthy and still have a love and passion for the business.

Acknowledging the transition will most likely happen in the next decade or so, he confides with laughter, “I’m getting the push already from Brendan!”

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