Elements That Make a Business Succession Plan “Win-Win”
By: Barry E. Haimo, Esq.
MONTH ##, 2021
You work hard to make your business successful, but as the years go on you may start to hear retirement calling your name. The reality is that you will not be running your business forever, so it’s imperative you take steps to ensure you pass the company on to the right person. To do this, you need a business succession plan.
Of course, not all business succession plans are created equal. To get it right and avoid unexpected hard feelings, it requires a lot of communication, thought and foresight. And while no two business succession plans are the same, there are key elements that can make your business succession plan a win for everyone involved.
What are the common denominators of a win-win plan?
Give Yourself Plenty of Time
One of the keys to successful business succession planning is to start early. It can take several years to create a winning plan, and you want to give yourself plenty of time to build an exit strategy and to consider your own personal retirement planning. It’s crucial to determine how much time you need to work in order to build the retirement you want, then create a plan with that timeline in mind.
The more time you spend planning your succession, the smoother the entire process will be. Once you’ve created a plan, it’s important to revisit periodically. This way, you keep it current and address any issues that may have popped up since its creation.
Identify a Successor
There are generally three ways that succession goes – to a family member (or several family members), to an indispensable employee, or simply selling your business to a third party. If you’re considering family, then you have to honestly consider who would be best suited to carry the torch and manage the business successfully. Keep in mind the difference between ownership and management when planning to pass the torch to family. If they’re already involved in the business, that’s a good starting point. However, this isn’t an easy decision and it’ll take some very honest conversations to find the right family member in many cases.
If you’re thinking of selling to an employee, the questions are much the same as they are with a family member. Can they carry on the business? Do they have the best skill set to do that? If they don’t, can they attain the skills they need before the succession? Do they have personal financial resources of their own?
Sometimes, the easiest option will be a sale to a third party. In this case, you need a plan that prepares the business to develop its value for the sale so that you can get the best price.
Prepare the Structure of Your Business
Another key element to a successful succession is the preparation of your business to pass from one owner to another. This can be done through careful planning with legal and accounting advisors to help you review your current structure and identify any changes that must be made for the transition. The share structure and whether you plan to have a family member, employee, or a third party take the helm is another important aspect that must be assessed.
You can make a business succession plan that runs smoothly and makes your transition to retirement painless. The key is to work with a professional that can help you plan. Our process can make leaving a legacy you can be proud of easier than you think. Contact the experts at Haimo Law today.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
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