Business Succession Planning
Ray Harrison
Disruption can be Negative and Positive. I research to bring Positively Disruptive Technology Trends to Forward Thinking Business Leaders. I also serve as SVP, Corporate Development of LifeActive Bio. "We should talk."
Business owners often disregard the importance of succession planning. Exiting their business is inevitable for business owners, whether it is due to a divorce, illness, retirement, bankruptcy, liquidation, or death. The transition and continuation of the business will go smoother if there is a succession plan in place. Here are five important steps to take into consideration when developing a viable succession plan for your business.
- Establish goals and objectives: Develop a collective vision, goals, and objectives for the business taking into consideration all the parties involved: business owner, management personal and family. Establish the owner’s personal retirement goals and cash flow needs.
- Establish a decision making process: If family members are involved in the business, identify and establish governance process and a method for dispute resolution. Document the succession plan in writing and communicate it to all the parties involved.
- Establish the succession plan: Identify successors; consider family members, managers of the company, owners of the business, or outside professional management. Identify and define active and non-active roles for all family members, and identify any additional support from family members to the successor.
- Create a business owner estate plan: Define and address the tax implications to the owner/business upon sale, transfer of ownership, death or divorce. Look for ways to minimize taxes and avoid delays in transfer of stock to remaining owners, spouse, or family. Create a buy/sell agreement that reflects the accurate value of the business and minimizes taxes. Additionally, make sure to design the best strategy for a Retirement plan. If the business offers retirement benefits to the employees map out the process to provide a smooth transition.
- Create a transition plan: Consider all your options: Outright purchase, financing options, gift/bequest, or a combination of these. Establish a timeline for implementation of the succession plan.
Taking these five steps can help save you money and time, and most importantly may play a critical role in the continued success of your business. Additionally, at Eagle West Group we recommend consulting with a professional advisor to help with the process.
This information should not be considered tax or legal advice. Please see a qualified tax or legal professional for advice related to your individual situation.
Sources
AllBusiness. "5 Steps To Create A Viable Succession Plan For Your Family Business." Forbes. Forbes Magazine, 12 Oct. 2013. Web. 10 July 2017.
Cussen, Mark P. "How To Create A Business Succession Plan." Investopedia. N.p., 03 June 2007. Web. 10 July 2017.
"Plan Your Exit | The U.S. Small Business Administration." Small Business Administration. N.p., n.d. Web. 10 July 2017.