Succession Stories host Laurie Barkman, The Business Transition Sherpa(™), welcomes Rocco Cozza, Founder and Managing Partner of Cozza Law Group, for a conversation spotlighting a topic owners may be starting to think about, but not yet talk about – business legacy and succession planning.
Learn key framing questions to help you think about business legacy and implications for planning your succession. “What do you want people to say about your business when you’re no longer here?”
It’s important to plan for your exit from the beginning. If you want to build a business to stay within your family and you want your kids to be involved, have that discussion early and often.
And if you’re not giving yourself a minimum of five years for exit planning, you won’t have enough time to address risk levers and do the planning you need.
Enjoy this Succession Stories episode about business legacy and succession planning with Rocco Cozza.
Listen in to learn more about:
- Critical aspects of planning
- Finding your business legacy
- Ways to mitigate risk as you plan ahead
- Achieving exit success without regrets
Find Rocco here: https://www.cozzalaw.com/
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TRANSCRIPT:
Laurie Barkman
Rocco Cozza, Welcome to Succession Stories. I’m so excited to be with you today. Our blues look amazing together. Look at this coordinated better.
Rocco Cozza
Absolutely. I appreciate you having me.
Laurie Barkman
Two of us are from Pittsburgh. Why don’t you tell me a little bit about yourself and your firm?
Rocco Cozza
I’ve been practicing law for two decades now. When I came out of law school, I worked in one of the big law firms then I went in-house. I was General Counsel of an international IT firm for 14 years. It was great. It was a great transition into the business board; I ran the legal department, got to travel the world, got to actually practice law differently, where I was really advising one business in all aspects of that business. I was with them for 14 years, went through a lot of different management changes. Finally, in 2018, I decided I wanted to resign. I just didn’t enjoy corporate America anymore. I wanted to go off on my own. I couldn’t. I resigned in 2018 and consulted with that company for about a year. Then July 1, 2019, is when I incorporated my firm.
I had been practicing law kind of part-time for small clients but July 1, 2019, is really when I decided I wanted to grow this thing. It started as me as a solo practitioner. Now we’ve grown, we have 10 employees, six lawyers, we probably have 400+ clients. We’re a business law firm so we do everything from startup to exit planning. We work with startup businesses to Fortune five hundreds, we handle our commercial litigation, employment, IP. Then we have a whole other piece, where we started doing estate and legacy planning, which we found that we saw a need with our clients, or their business owners that haven’t really thought about that their legacy planning their estate planning. We brought on an attorney to really handle that practice area and that’s been growing substantially over the past six months. We have a great team. I started the firm because I wanted to do things differently. Being at a big law firm, working in-house, I saw what big law firms did wrong. So when I started the firm, I asked people in business, I said, What don’t you like about lawyers? What don’t you like about law firms?I just said, as long as we don’t do those things, we’ll be okay. In the end, our goal as a firm is to give our clients peace of mind. That’s what we really sell, we provide legal services, but in the end, it’s my job and the firm’s job to give our clients peace of mind.
Laurie Barkman
People don’t usually associate lawyers with entrepreneurial spirit. On this show, however, I do enjoy speaking with attorneys who understand the ethos of entrepreneurship, because they work with entrepreneurs. But also for you, as a founder, you are the entrepreneur, so good for you for taking that risk making the leap, and starting your firm. I think the mission of the business is spot on.
When you work with clients. One of the things that you and I talked about at lunch, which was such an interesting, fascinating topic is this idea of business legacy and it’s nice that we’re both local and could have had that over a wonderful lunch. Let’s bring that to the show. Let’s talk about business legacy. When you work with clients on Exit Planning and transition, then, you know, that’s a big topic for me and a big topic for the show. What does that mean to them most often?
Rocco Cozza
Let me start by saying that most often they’re not even thinking about it and that’s the scariest part, right? Because they spend all this amount and I’ll kind of give you a customer avatar: say we have a person, late 40s, early 50s, started the business, has kids been running the business for 10 years. When I start that discussion with them, their immediate instinctual response is my kids are going to take it over and 90% of the time, that’s not the case. My response is “Have you talked to them about it? Do they want to do that? Or are you just making this assumption?” Because there are a lot of things you have to think about, right? Me as a business owner, I started this business, this is my baby. I’ve built it from the ground up, I look at it a certain way. When we’re working with clients, they look at their business a certain way and they have this pride in it in. We have to 1.) Understand what is the end goal they’re trying to achieve? Do they want to create a legacy and somehow keep it within their family? Do they just want to exit for a bunch of money? Do they want that exit to provide generational wealth for their family? There are a lot of different pieces to it, but in most instances, the clients aren’t even thinking about that. It’s a conversation that is kind of kicked down the road and it’s my job, the opportunity to stop and pause the client say, let’s start planning for this now because planning for an exit when you’re exiting is the worst time to do it.
Laurie Barkman
Let’s just underscore that, for the exit, when you’re exiting is the worst time to do it anymore. Do you think that owners are fearing the unknown? They don’t want to think about it. They’re not familiar with it. So it’s easy to kick the can? Or is it a taboo topic?
Rocco Cozza
I think it’s a combination of both because when you think about exiting a business or coming to the end of something, we’re talking about our own mortality, and no one likes to do that, right? Even when you’re creating your estate plan, no one wants to have that discussion because we all think we’re invincible. We all think this is gonna last forever. I’m 45 years old and do I think the end is in sight? No, but I have to plan for it because there are so many unknowns in this world. The economy can change, I can be in a horrific accident, and there are so many things that could happen.
I think there is this fear, this inherent fear that business owners have, that if I can get a lot of them think that if I talk about it, I’m speaking it into existence. I think if I just don’t talk about it’s not going to happen, that’s the wrong way to approach it. Plan for these things, think about them. I don’t want to say necessarily, it’s a taboo topic, but it’s an uncomfortable topic for most business owners because you’ve built something and now you’re talking about what happens to that thing you built when you’re no longer there.
Laurie Barkman
Do you think that the phrase, business legacy helps people think about these topics a little differently than Exit Planning, retirement, or whatever the other options could be death?
Rocco Cozza
I do and that’s why we use that topic because just take estate planning versus legacy planning. When people hear estate planning, they think, I’m planning for when I die. Legacy planning is I’m planning for my legacy to live on past my death. It’s just a different frame of reference. Business legacy planning to me just strikes a different chord with clients because Exit Planning means I’m done. There’s an end, right? Legacy means I may be done but what I’ve created will carry on. That’s how I look at my firm like, I want this firm to live on way past my desk. So I’m looking at the legacy we’re creating long term, not how I’m going to exit the business someday. I think when you frame it that way to a client, it’s a more palatable discussion and they’re more inclined to open up and really think about what that legacy is.
Laurie Barkman
That’s a good jumping point. What are some of the questions that get people to open up?
Rocco Cozza
One, when I meet with a client, I always try to read the client to understand what type of questions I should ask because every client is different, right? One that I found that really helps them or helps them open up is, what do you want people to say about your business when you’re no longer here? And it’s kind of just that very basic questions they’ve never really thought about and it could be I want people to say he treated his employee or she treated his employees well, or they built a great product, or they changed an industry or they change the world. So when they start thinking about what people will say about what they’ve created, once they’re gone, that’s how I typically open the discussion, then you can start probing a little bit. Because if they say, “Hey, I know I want people to say, I treated my employees really well.” Okay, well, why are your employees so important to you? How do you treat them now? How do you want them to carry on your legacy? Maybe then it becomes an ESOP plan. There’s a lot so you kind of got to take that conversation. Take those answers and that really helps frame that Exit Planning discussion one way or the other.
Laurie Barkman
I find that as well. If you can get people to think about things outside themselves, take the separation from the business, and legacy is really the sustainability of that entity for their employees, for the community, for stakeholders that they care about. It helps give a runway. As we talk about you and your company, you mentioned it. You’re only 45. Have you put a timeline out there with clients and for yourself to say, “Hey, the general rule of thumb is 10 years out 5 years out” What do you find is a good rule of thumb for your clients, and then what are you thinking about for yourself? Just to give a little case study here.
Rocco Cozza
For my clients, I always tell them if you’re thinking about it inside of five years to see, you didn’t give yourself enough time, a minimum of five years out. Depending on how you’re going to do it, you may have to restructure things, and make sure the things you have in place are in place and in place over time. I always say a minimum of five years, if we’ve got seven to 10 years, and we’re thinking that long, that’s even better. But a lot of times, again, getting a client to open up that discussion is hard.
When you finally get them to that point, they are thinking about what am I going to do next? So I say we got, in my mind a minimum of five years, seven attendance rate for myself. They joke about it here, they call me, I’ll be the old man coming into the office when I’m at, but I truly love what I do. I love the firm we’ve built and I love what we’re creating, I don’t see myself ever exiting. I see myself maybe slowing down 30 years from now but we’re just getting started. We were four years old and you know, we’re growing 50 to 60% year over year. I’m in the excitement phase. Now I’m still looking at like, we’re doing some strategic planning now as we bring in different partners, how do we structure equity? So if, in the event I do, we just tend yourself? I’m done. How do I get out? But I’m not even that’s not even on my radar at this point?
Laurie Barkman
I love that you brought up strategic planning because that’s where I’ve been focused a lot with clients. My starting point was coming out of corporate America, and finding that I had a skill in strategic planning, and working with smaller companies to help introduce the tools and the practice, because many of them would have a napkin and not write things down at all. Over time, that practice has evolved as I emerged it with transition planning, and the process of strategic transition planning should make sense to folks. Why do you need a strategic plan for your business? To work on things, we need to align our people.
Let’s think about it the same way on the transition planning side. If it’s five to seven years, shouldn’t we start the process? What are all the things we need to do? It’s hard and that’s why I think my audience likes the show because I bring people on like yourself who have a different skill set than they’re probably used to working with. When it comes time to bring in the right people, we need to plan for that and plan ahead. I know you like collaborating. When you’re working with a business owner, that’s a new client. What are some of the things that you’d like to wherever you start? You started with this conversation and then moving from there? What are some of the let’s call it contingency planning, if you will, to help them reduce risk in the business? What are some of those first things? If you say first six months of when we’re working with a business owner, or client, we need to reduce risks. What are those things that you look at?
Rocco Cozza
That’s a great question. Again, every business and industry is a little bit different but from taking your kind of a cookie-cutter approach, we’re always going to look at how you’re structured, right? Is your foundation built correctly, meaning your entity, your governance documents, and all of the legal framework that your business is hitting upon, we’ve got to make sure that because you’d be surprised at how many people have formed a business online years ago, and now it’s a $20 million entity, and they don’t have some of the basic fundamental agreements, they need that if something goes wrong with that protects them. We do that first. Then we say we need to understand your business. I’ll sit down with the client, say, tell me about what do you do? What do you sell? what service do you provide? Tell me about your clients. Tell me about the industry since the idea. Look at what are the risk levers right there. If you’re in a high-tech industry, are there data privacy risks? Are there cybersecurity risks? If you’re in construction or industrial, there are different types of risks I look at, I want to understand that right, that framework, and that landscape. Then I say, how do you engage with your clients? What are the contracts you’re using? What are the agreements you’re using? We need to look at that and make sure they’re buttoned up as tight as you can never have, 100% ironclad agreement. If an attorney tells you that they’re lying because there’s no such thing, but our job is to make it as tight as possible and then to look at it.
What I’ll do sometimes is go through that contract, and actually ask the client, do these things actually apply to your business? Sometimes they’ll have old contracts that someone else may have put together, or they found online somewhere, that half of the document doesn’t even apply to their business so they overcomplicate things. We look at that. Then the last piece really is if they have employees. Looking at how do they engage their employees. Do they have the right policies in place? Are they following all the laws they need to they need to follow? Although depending on where they’re located, when it comes to employment, how do they treat their employees? How do they communicate with their employees? These are all the biggest risk areas, you’re dealing with customers, your foundational documents, and dealing with employees, we’ve kind of done that. We’ll call it a health check of the business and that’s really the first part that we do we welcome new clients.
Laurie Barkman
Gotcha. A couple additional questions for you to start to round down the discussion here. Lately, I’ve been thinking a lot about regrets and how business owners can exit without regrets. In your experience. What do you see as some of those success factors?
Rocco Cozza
That’s a really good question. Again, success factors are different per owner and it’s one of understanding what those are. To someone who may not be money. It may not be a large lump sum, it may be, “I’ve created a sustainable business that will live past me I have the right next-level management in place to take over” or “I made enough money from this business to fund my family for the next two generations.” So those are success factors there. They’re very individualized, I believe. But if I look at if I take all the clients I’ve worked with, it really boils down to probably two or three, it’s one, did I build something that created enough wealth for me? Meaning I put all my eggs in this basket? I didn’t really do anything else. Did I put enough effort into this where I actually created the wealth I was trying to create? Second pieces? Did I create something sustainable past me? Meaning this will live on with what I’ve built in the people that I put in place? It will live on past me in 30. Again, this is kind of a qualitative thing. But it’s, “did I enjoy the process?” Because I think a lot of business owners have regret. When they look back, they say, I just did it for money and I wasn’t passionate about it. I didn’t create anything sustainable or that benefited the bigger world. I think that’s a big regret here with business, they did it just for the money. I think that they can look back and say, I had fun doing this and I was passionate about it. That’s a big success factor in my mind.
Laurie Barkman
Are there any standout stories you’ll hold? Either this scenario worked really well, for the family, or this scenario just did not that you can share?
Rocco Cozza
It’s probably more of a horror story than it because success stories are great. But this is the one, it comes down to making the assumption that your family is going to take over the business. I’m thinking one particular client, this person ran a great business was very involved. Kids were working in the business and the assumption was, they’re gonna take over, but the kids were planning on doing something else. They were planning on “sell the business, I get a payoff. I move on to do something I’m passionate about.” That conversation came to a head. It was not a pleasant conversation and it really caused a wedge within the family. That’s unfortunate and that’s why I say you have to have those discussions upfront because if you’re making an assumption, without validating the assumption, it’s going to lead to exactly what it led to a tumultuous conversation that really caused some strife within that family.
Laurie Barkman
What’s the learning there? If you were going to rewind history with the owner, what could they have done differently?
Rocco Cozza
Plan for the exit from the beginning. If it is truly going to be if it is something you want to build, to stay within your family and you want your kids to be involved? You need to have that discussion. Right out of the gate, the moment they step into the business that discussion is taken, is this something you want to take over? Because you operate differently. You’ll get them involved in different things, instead of making like never assume your family or your children or even your employees are going to take over owning a business and working in a business are two completely different things. It’s easy to give I had a family business, it’d be easy for me to work in that business. I’m working for my family, me running that business where I have the responsibility of all these other families, a totally different environment, and having those discussions very early on is the biggest piece of advice I can give any business owner.
Laurie Barkman
Perfect. Thank you so much for coming on the show and talking about things that business owners can start doing to be better prepared, and have the business legacy that they’re looking for. If people want to reach out to you Rocco to get in touch what’s a good way to learn more?
Rocco Cozza
You can get our website just cozzalaw.com You can always email me there. My email is just our codes at cozzalaw.com. Feel free to reach out, I always say I’m happy to just chat with someone. They want a second opinion or just want to pick my brain like we don’t charge for consultations. We just, I’m here to help in any way I can. So please feel free to reach out to me. I’d be happy to chat with any other business owners out there.
Laurie Barkman
Thanks, Rocco.Thank you so much. Listeners, be sure to follow Succession Stories in your favorite podcast player and on YouTube. Leave us a review five stars helps the show get discovered. To learn more about maximizing the value of your business and planning for transition. Sign up for our newsletter at the business transition sherpa.com. You can also book a complimentary call with me. Join us next time on Succession Stories for more insights from transition to transaction.
