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Succession Planning

Successful Succession Planning

Calls for a Deliberate Process

You’ve built a successful business, but have you thought about how you’ll make your exit? The business likely represents the vast majority of your wealth — so how you monetize it for retirement is an important component of your financial picture.

It’s easy to put off planning when you’re focused on day-to-day operations, or because you think you have an idea about who will take over your business and how that will look. Yet the time to address succession planning is five to 10 years before your expected exit date, because creating a successful plan is a deliberate and complex process.

Here are some key aspects to consider, which we can walk you through as you do your own planning.

Family Business

When it comes to your business, talk with family members early and often about their desires.

Family-related issues grow with the family tree as more members stand to benefit from the work of a few. You’ll need to resolve these questions, and more, regarding family members:

  • How do they acquire the business from you?
  • If you’re dealing with stock, do you gift it or sell it to them?
  • Do you finance the sale or require them to get bank financing? 
  • What are your, and their, income and estate tax consequences of the alternatives to a sale?
  • Do you have an adequate life insurance policy on the owner and key executives to redeem out an owner or pay estate taxes if you die?
  • Do you have key employment contracts and noncompete agreements on key executives that would prevent them from opening their own shops to compete with the business if you sell it or die?
  • If you do sell, does a child working in the business have a job with the new owner?

Financial Performance

For your company’s financials to look impressive to a prospective new owner, we will help begin laying out a plan to show the business’s growth potential, profitability, and return on investment.

Questions that our team can help you explore include:

  • Do you have a well-trained and educated workforce?
  • Can the business run without you?
  • Do you have well-defined, documented, and efficient business processes?
  • Do goodwill and other intangibles exist that can be transferred to you?
  • How do you compare with your competitors?
  • Is the industry itself at risk from new technology (e.g., you may have the most successful hardware store in the area, but is a big-box store a threat on the horizon)?

Tax-Efficient Ways to Sell

It’s not what you sell the business for but what you keep that’s important. For example, an employee stock ownership plan is an excellent way to sell a business, or you might also consider financing some or all of the sale. We will help you understand your best options when it comes to tax liability issues related to the sale of your business.

Exiting your business can be daunting, but you don't need to do it alone. Our team is waiting to assist you through every step of the process. Contact us to schedule a consultation.

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