BUSINESS SUCCESSION PLANNING
HELP ASSURE YOUR BETTER LEGACY WHEN IT IS TIME TO IMPLEMENT AN EXIT STRATEGY
One of the chief concerns facing owners of family or closely held businesses is how to affect an orderly and affordable transfer of the business to the next generation or to a key employee.
Given adequate time and proper planning, that objective can be accomplished easily and often profitably.
However, as most business owners know, there is rarely enough time to accomplish day-to-day tasks, much less to plan for something that is unlikely to happen for many years. How and when to address business succession planning are questions that do need answering though, preferably before problems arise.
DO YOU NEED TO HAVE A SUCCESSION PLAN?
Estate taxes alone can claim 18 to 55 percent of a taxable estate, frequently resulting in businesses having to liquidate or take on tremendous amounts of debt just to stay afloat following an owner’s death. For business owners who have done all they could over the years to avoid or pay off debt, the prospect of going back into debt to pay taxes is unpleasant.
Therefore, one of the more important aspects of business succession planning is being prepared for the financial repercussions that can follow the death of the business owner, answering questions like:
SUCCESSFUL BUSINESS CONTINUATION
Many of the above questions can be answered through the proper use of such funding vehicles as life insurance, annuities, and disability insurance – often at little or no net cost to the business.
The time to put these systems in place is before the situation arises, not afterward.
Do not think business succession planning ends with an estate plan and life insurance firmly in place.
Business succession planning must also include a plan for transferring the trust, respect, and goodwill that has been built up over years of operation.
If the recently departed owner was a large part of the reason clients were willing to do business with the firm, these clients need to be reassured that they will continue to receive that same quality attention and service.
One of the best ways to accomplish this goal is to begin transferring such loyalty while the owner is still around.
This can be done by introducing clients to younger associates now and by shifting some of the responsibilities connected with accounts to those associates – making clients comfortable doing business with the “next generation” of ownership, with no change in quality of service.
Better yet, let clients see an improvement. Teach younger associates about the “power of doing the unnecessary.”
In this case “doing the unnecessary” can mean anything from sending clients notes to stopping by or calling.
Not to sell something – but just to keep in touch.
Essentially, it is letting them know that they are important and that you value their business. Little by little, the “owners to be” will earn the trust and confidence of your clients.
RETAINING GOOD EMPLOYEES
This means paying attention to the details to retain good employees.
WHEN SHOULD YOU START SUCCESSION PLANNING?
So where – and when – should business succession planning begin? The start-up phase is obviously too early. But too often, business owners wait until the last minute, when important options, including the potential un-insurability of a principal or key employee, have closed.
Generally, setting up a successful business succession plan involves seven stages:
If seeing your business continue into the future — without compromising your own retirement needs — is important to you, this last step may be the most important of all.
The success of your business depends upon the accuracy and completeness of your business & entity planning
Contact us today to talk to a business law specialist who has the expertise to help you plan your business.