I had the distinct joy of growing up in Concord, Massachusetts, a town immersed in its own venerable past – the Old North Bridge, the Concord Renaissance (generally called the New England Renaissance, but we see it our way), and perhaps the finest pizza place in the world.
It’s a town of green natural beauty, proud tradition and stubborn-as-nails old Yankees.
As for those townies, my father had a thing or two to say about them. It’s commonly believed that the 1960s were a time of revolutionary change, but I’d argue that the ‘50s marked the real watershed. In the post-war boom, blue-collar workers made good and relocated from the old urban, ethnic neighborhoods to the promising suburbs. The dream came true for so many of them, but sometimes, the newcomers with the odd names were not initially welcomed. Case in point, Concord, in 1953.
The problem manifested in distinct rudeness from the local shopkeepers. In our neighborhood, the homeowners club, fed up, took direct action. The men donned their best Sunday suits and drove into town, no muskets in sight, but determined as Minutemen.
They marched from store to store, my father said, and apologized profusely. We’ve obviously offended you by shopping here; it’s your business and we don’t dare bother you further. In future, we and our wives will go elsewhere.
In every case, the owners came scuttling around the counter. No! No! There’s been a misunderstanding! Please, you’re welcome here! “Those old Yankees,” my father said, “they had their principles, but the almighty dollah was king. There was no more trouble.” Whenever he told it, he’d laugh with his signature mirthless chuckle. Dad started as a lathe operator and worked his way into management, but his factory-floor cynicism, dusted with menace, never left him. I admit, it surely did sound a riot.
This incident started a sea change in Concord. The shops flung open their doors to the curious Greeks, Irish and Italians, and found them nice gals, honest fellas, good customers. Venerable stores were eventually sold to the newcomers and fresh enterprises launched. Imagine an Italian pizzeria, run by a Greek immigrant’s kids, opening its doors in the Colonial cradle of the Revolution. All you need to know is, it’s still there.
Many moons later, while working in Moscow, I was confronted by this factoid: in Russia, 70% of GDP was generated by major industry, and the remainder by small business. In the US, the proportions were exactly reversed. This sails us right back to Concord and the personality of Walter, one of those newcomers, who famously bought the drug store on the corner of Walden Street. The store had been a fixture for a century – in my early childhood, it still had a soda fountain – but Walter made it his castle and the linchpin of main street.
Walter was sharp. As a young man, he volunteered for the Coast Guard, to get his service done before the draft board could snag him. He loved boats and later wound up with a doozy. Walter used the GI bill for pharmacy school, took a low-interest veteran loan and opened up shop. Walter was a hot ticket, a Concordian rat packer, but he was personable, he’d let you run a tab, welcome kids in his store, to a point. Even narrow-eyed dad admired him.
No partners, I heard Walter say. I worked for him during my gormless teens and probably missed out on useful lessons, but this I picked up: he shouted it every day. Walter did particularly well buying out failing pharmacies – he’d pick up their stock for a song. Then, in the ‘70s, he got his mitts on a viable property and the partner maxim fell by the wayside. Still, I remember his chuckle, when he said: “It’s ok – I’ve got it all locked up. No one’s getting the better of me.”
What an old hard-noggin, as we say – but soon, he had a bigger boat – man, he could make that dollar squeal. Walter took me fishing on her, despite my colossal goofiness, so along with his bluster, he had a heart.
Walter never told me how he ‘locked things up’, but small businesses can all benefit from some boilerplate estate-planning advice. The rules are so tried-and-tested, I’m sure Walter had them in place, along with some other tricks that our compliance team would not let us share, were we aware of them.
Small businesses, like Concord’s awesome pizzeria, are often run by families or associates, not uncommonly close friends. They trust one other, so they occasionally neglect to get things in writing. This can be a serious mistake, for one thing because people die and not always on schedule. If a key partner takes the big powder (as we say), their shares usually pass to family, and that often lands the surviving partners in the soup.
A buy-sell agreement, which gives surviving owners first dibs on the deceased partner’s shares, solves this problem. Life insurance can be bought for each partner with death benefits sufficient to buy out a decedent’s stake. The amount will need to be adjusted regularly as the business prospers, but given the turmoil you can expect without it, this is an easy and obvious solution.
Small-business owners will want to retire one day, and they’ll likely want their darling, now a going concern, to keep forging ahead. Walter groomed his oldest daughter – the smart one, he’d say, right in front of his three other kids – to take over, and she was a great choice. But what if there were, say, two other partners, with dreams of passing a torch of their own?
The partners have to agree, well in advance, on a succession plan. Less than full agreement can turn a happy workplace into a snake pit. We’ve seen it, and it’s a tragic way for a good business to die. Succession plans can be hard for partners to negotiate and professional help may be required, but the expense is worth it.
If the business grows big enough, it can turn into a tax burden on the owners’ estates. Over time, a smartly run barber shop or burger joint can turn into a chain. Traditional estate-planning tools are often suitable for small businesses. To limit estate taxes, shares in the concern can be gifted to family while the owner is alive – Walter did this with his daughter, I’m sure.
Other strategies can mitigate potential estate-tax hits. Non-business assets like securities can be sold to bring down the estate’s value, capital gains taxes as a rule being lower than estate levies. Estate-planning professionals are ready to help small businesses find their way. You’ll find these services everywhere, even in the quaintest, and prissiest, small towns of America.