When Failure is an Option

“I have not failed. I’ve just found 10,000 ways that won’t work.” 
— Thomas Edison

I recently read an editorial in the New York Times called “The Power of Failure,” in which the writer addresses how nonprofits are tempted to hide their failures while some for-profit industries have accepted that failure is part of the process.

Sarika Bansal quotes Wayan Vota as saying, “In Silicon Valley, failure is a rite of passage. If you’re not failing, you’re not considered innovative enough.” Mr. Vota is a technology and information expert who recently organized a conference in Washington called FAIRFaire that focuses on lessons learned from projects that failed.

As a turnaround expert, my career is focused on working with companies that are experiencing failure. If a company is thriving, they don’t need me. I’m brought in when things aren’t so rosy.

successI don’t really want any company to be failing to the point where I’m called in to turn the company around.

On the other hand, I don’t think it’s best for any company to enjoy a straight line of success. There are so many lessons to be learned from failure and if CEOs and business owners don’t learn how to deal with failure, they won’t know how to handle it when it inevitably happens.

A few years ago NPR correspondent Eric Weiner traveled the world to investigate where people are the happiest. He wrote the bestselling book “The Geography of Bliss: One Grump’s Search for the Happiest Places in the World.”

One of the fascinating things he uncovered was that people in Iceland are generally happy, which he attributes in part to the fact that failure doesn’t carry a stigma in Iceland. It’s totally normal for a person to have a résumé reflecting multiple careers — from journalist to executive to theologian — failing at some junctions and continuing on a different path.

For a company to grow and flourish, it has to be innovative and creative. Along with that comes a certain amount of failure. As a CEO or business owner, you want to encourage that innovation, while not stigmatizing any failure that may result from trying something new.

Take a lesson from Thomas Edison. “Negative results are just what I’m after. They are just as valuable to me as positive results.”

Confucius said, “Greatness is not achieved by never falling but by rising each time we fall.” Will Rogers said,  “To avoid failure is to limit accomplishment.” Jack Welsh said, “I’ve learned that mistakes can often be as good a teacher as success.”

One of my favorite perspectives on failure comes from basketball superstar Michael Jordan and I urge you to take it to heart if you’re dealing with a setback at your business: “I have taken more than 9,000 shots in my career. I have lost almost 300 games. Twenty six times I have been trusted to take the game winning shot and missed. I have failed over and over again in my life; and that is why I succeed.”

I love the drawing by comedian Demetri Martin about what people think success looks like compared to what it really looks like. Success is not a straight line. But the important point is to keep your company on an upward path, no matter how many times it takes a backward step.

If you’ve made a mistake or failed at something at your business, admit your mistake. Learn from it. Encourage your employees to do the same.

Don’t Wait for Miracles: Act on the Gift Tax Exclusion Now

In this world nothing can be said to be certain, except death and taxes.

— Benjamin Franklin

The only difference between death and taxes is that death doesn’t get worse every time Congress meets.

—  Will Rogers

It actually will take an act of Congress – well, to keep the lifetime gift-tax exclusion at its current rate, that is. For the past two years the lifetime gift-tax exclusion has been at a historically elevated rate: $5 million in 2011 and $5.12 million in 2012.

It was a complete surprise when Congress voted to raise the limit at the end of 2010, which had been at just $1 million, prompting some folks to refer to the new provision as a “Christmas miracle.”

ImageBut that miracle is due to expire December 31, when the exclusion is scheduled to revert back to $1 million. And if you own or work for a family business, you need to pay attention to that deadline.

We have just entered the fourth quarter of 2012 and unlike the decision of where to hold your annual spring retreat, or whether Uncle Bob can get his office redecorated, this one can’t wait.

If an older generation has ownership in the family business, this is the time to consider gifting all or a portion of that ownership in the company to the younger generation to benefit from the $5.12 million exclusion

If a married couple have ownership, the exclusion doubles. So if dear old grandma and grandpa or mom and dad own the business, they can potentially save the company millions by exercising all or part of a lifetime gift tax exclusion of $10.24 million before December 31.

John Glass has owned a refrigeration and air conditioning distributor in Aurora, Illinois for 40 years. Last year, he gifted $2 million of company stock to his three daughters, and he and his wife are considering gifting more this year, according to an article on www.bloomberg.com. His company stands to save millions in taxes from that gift.

Taking advantage of the current lifetime gift can substantially reduce a family’s tax burden and will also reduce potential estate taxes in the future.

Another factor is that the percentage of tax due on amounts exceeding the limits of the gift tax rate will increase from the current 35% to a whopping 55% at the end of the year.

If your family hasn’t discussed who will take over the business in the future and how the transfer will occur, now is the time for that discussion. It could save the business millions of dollars as well as the headaches and hassles involved if there is no current succession plan in place. The greatest threat to a family business is the failure to plan and manage succession well (more on that topic later).

The issue of giving up control can be a big one, and is often the reason families haven’t had the discussion about succession. There are ways that a donor can maintain control even after gifting part or all of the interest in a company.

There are several ways to make use of the lifetime gift tax exemption in the last three months of 2012. However, these are complicated issues, and you need to contact your estate and trust attorneys immediately. You want to ensure that the right decisions are made for future of the business and for the family.

No one knows what Congress will do, whether it may extend the lifetime gift-tax exclusion or not. Make sure you are prepared for whatever happens for 2013.

Time is running out. Do you really want to count on Congress for another miracle? Didn’t think so.