- Is Your Business Ready for Your Departure?
- November 28, 2017
You are getting on in years, are the founder of a successful business, and are starting to think about the next phase of your life and retiring. Maybe you are just getting tired of the daily grind and would like to travel or spend more leisure time with grandchildren. Or perhaps you or your business partner has had a recent, serious health issue, or an unsolicited offer to buy the business has been made, or worse yet, you have lost a partner or a key employee who you always expected would take over and buy you out when you were ready. Up to now, you haven’t had the inclination or the time to give any serious thought to planning this transition. But now that events beyond your control have intervened and forced the issue, you feel unprepared and ill-equipped to address this pressing situation. If this is you, you are not alone.
The fact is that over ninety percent of business owners do not engage in any advance planning at all for the succession of their businesses. Rather, some external event like those listed above typically triggers a hastily executed plan resulting in unexpected, immediate and significant change that too often precludes the ability to transition the business in an optimal manner to the benefit of the business and you and your family, both from a personal and a financial perspective. A fire sale is never for fair market value.
The good news is that this scenario is completely avoidable with the assistance of a competent business attorney with the experience and skill needed to develop a succession plan that is tailored to your business and your needs so that you have peace of mind and a plan in place that will be ready for execution when the time arises – for whatever reason.
A team approach to the planning process is best, with the business attorney acting as the quarterback, assembling the working group consisting of your accountant, estate planning counsel, investment advisor, banker, insurance agent and other trusted advisors as required for your particular situation.
The first order of business is to understand your vision for your future and that of the business, and to value the business. Part of this process also will be to identify and address any deficiencies in the business’s organizational structure and management team so that you and your business are optimally positioned for transition, whether by a sale of your interest to a family member, a key employee or management group, to all employees in an ESOP transaction or to an unrelated third party down the road.
The planning process includes an unbiased review of all aspects of the business to position it for transition, including its operations, finances and management, including identifying and fixing, well in advance of the intended transition date, all impediments to an optimal buy out for you as owner. In a family owned business, this process usually also includes identifying family members who are likely successors and providing experiential training and promotion strategies for them to assure that they will have the necessary skill set to take over when the time comes. The sooner this analysis is undertaken and implemented, the better – to make certain that you have the time to take advantage of existing tax planning opportunities to transfer ownership to your heirs at an affordable cost.
So take heart – you still have time. With proper succession planning, you can maximize your financial return for your life’s work by positioning your business properly for an orderly transfer with the least disruption possible at the proper time; you can then leave the world of work secure in the knowledge that your business will continue to grow and flourish.
To read the published article in the Daily Messenger, click here.