Succession Planning

What is the value of your business?

You’ve either realized that it is time to make an exit, or you have come to understand that the day will certainly come. How do you address all of the concerns surrounding this seemingly monumental task?

Who will take proper care of what you have built? A family member? A competitor? There are other options too.

A defining characteristic of family businesses tends to be the desire of the older generation to ensure that the business stays in the family “forever”. In practice this usually just plain doesn’t happen. Blame is not usually due to a lack of planning, but rather in a lack of follow through; grooming for the role and the provisions for support after the transition.

Obviously, second generation transitions have a huge advantage over first timers, but early planning with regular concept reinforcement will help ensure the idea doesn’t drift away.

Your competitors probably already have a concept of what they think your business is worth. They have probably thought of absorbing you just as much as you have thought of absorbing them. The most important common element here is: you need to know what your business is worth.

Before you sell or exit your business, you will need to evaluate your business revenues, assets, property, etc. A host of other factors will need to be assessed like future potential profit, competitors, intellectual property, and customer base.

Also, since your business and personal needs are intertwined, we can help you integrate your Succession Plan into an overall strategy. You’ll need to have access to professionals with expertise in Succession and Tax Planning, Financial Planning, Insurance based solutions, Investment Management, as well as Estate and Philanthropic Services.

Start by calling on us; we can help.

What are some of your options to consider?

It is important to look for an exit strategy that fits both your personal and business objectives. Some of the options to consider when planning for your business succession are:

  • Transfer to a family member – Identify the candidate(s) and discuss the plan; make arrangements for the transfer or sale of your business to a relative; which can perhaps be tied in by making use of the next example.
  • Consider recapitalization – In order to begin to transfer the business value while retaining control of the company, recapitalization may be the answer. In this example, two classes of stock are created: voting preferred and non-voting common stock. The non-voting stock is transferred either through sale or gift to the successors. The voting preferred is retained until such point, as the owners are ready to transfer control.
  • Sell to the employees (ESOP) – Sell the business to current employees who know the business and are interested in seeing it continue.
  • Sell to a competitor or other private third party – Consider finding a buyer and beginning a discussion which leads to a sale.
  • Sell to a partner or group of partners as a management buyout – This consists of the management team pooling resources to purchase all or part of the business that they currently manage.
  • Consider a Public Offering – Using this method, corporate shares are offered to the general public and traded on the stock market. This is usually a very expensive option that requires sufficient revenue base and a strong business plan. In addition, it is not optimal as an exit strategy if you are near retirement.
  • Liquidation – Perhaps there is no market for the business as an ongoing entity or if other options are not available, you may choose to liquidate the assets that the business holds, and close the business.

Contact us today to review your current succession plan or develop a new one and let us provide streamlined, cost effective solutions that will meet the needs of your business.