By THOMAS HARTLEY
Business First

The recession is driving retirees back into the workforce and making older workers postpone retirement, some surveys say.

Some local experts in family-business planning also believe that as this trend continues, older owners are delaying passing the torch to a younger generation because a battered economy has put the financial pinch on their business and also driven down the value of their investments.

The result: Incoming younger family members, a la Prince Charles, have to cool their heels in the wings waiting for the older generation to step off stage.

"Anybody thinking of transferring a business is probably putting it on hold at this point because there will have to be some money transferred to the retiring party to hold them over until the family business is able to start making regular payments to them for the purchase," said Vincent Agnello, director of the Niagara University Small Business Center.

But Harry Jacobs, chairman of The Jacobs Team, has a different opinion. Instead of putting a damper on ownership changes, a poor economy might actually present the best opportunity for one, he says.

"I tell my clients who are already mentally prepared and ready (to put a plan into action) to use times like these to their advantage," Jacobs said.

"A family-owned company that could be worth $25 million in other times might be worth less in a poor economy," he said.

"Gift and estate taxes are attached to how much a business is worth, so if the value is down, the taxes are less," he said.

Jacobs, 72, went through his own generational change seven years go when he passed the ownership and presidency of the Hamburg business on to his son, David.

Many people involved in family businesses, however, tell Agnello that in the present economy, banks have tightened up on financing to businesses by cutting their lines of credit or restricting the types or amounts of loans that they are willing to give.

Because many owners don't set aside money for retirement, he said, "in many cases, it's not just a case of saying ‘Here's the keys.'

"During a recession, when difficult decisions need to be made, the current owner must have full faith that the next generation will make as good as or better decisions than they would make," he says.

Getting family-business owners to publicly talk about their business plans, which they often consider private family matters, is difficult. It is doubly hard, though, if unusual events, such as the recession, make an ownership transition uncertain, Agnello and others say.

Scott Friedman, a lawyer with the Buffalo law firm Lippes Mathias Wexler Friedman LLP who also works with family-business owners to develop transition plans, says evidence suggests "that a number of senior family members who have lost significant wealth over the past year are choosing to remain active in their family business longer than previously contemplated.

"Those decisions, if not properly managed, can hinder the orderly succession of leadership and bring great strain to the family business," said Friedman, who is the author of several books, including "How to Run a Family Business."

John Slenker, economist for the New York State Labor Department's Buffalo region, says the economy undoubtedly plays a role in extending the working lives of Western New Yorkers - and, by definition, older owners' participation in the family business.

But with more people working past the traditional retirement age, business owners probably also are staying instead of bailing out at 62 or 65. Their departure dates might not now be as chiseled in stone as was the case earlier.

The U.S. Bureau of Labor Statistics' Current Population Survey confirms that more older people are staying in the workforce, Slenker says.

"However," he adds, "there was a big uptick starting in 2006 and 2007, so it's not just the recession but the fact that we have more older workers and they are not retiring as young."

Since 1980, Bureau statistics show that the number of workers over age 40 has risen significantly. By 2010, more than 51 percent of the workforce is expected to be 40 or older, a 33 percent increase since 1980, while the portion of the workforce aged 25 to 39 will decline 5.7 percent.

The economy might be less of a factor in ownership changes than many believe, says Peter Wendel.

Wendel, whose Peter Wendel Group in Lockport helps clients develop succession programs and put them into effect, says emotional factors might actually have a bigger influence.

"Considerations that usually come to play in these situations are more traditional, not something as variable as the economy of the moment," he says.

A common concern is whether the younger generation is capable of keeping the business going as a legacy to the outgoing owners, who may have founded it.

"How a transition will be impacted by the economy never comes up," Wendel says. "A big question, though, is always: ‘Are my kids the right ones to take it over?' or ‘Can my kids work together?' "

Emotion often plays a bigger role than cold, hard facts, Wendel says, "and the economy doesn't impact the emotional aspect."