Succession Planning Issues
Here are some questions and issues for family-owned businesses that I hear from many of my clients. I thought it would interesting to share some of these questions with you. It will spark some thought and questions as to how to address these issues.
Succession Planning:
How do you make a smooth transition from one generation to the next?
How do you pass ownership and plan for future management of the business in a fair and equitable fashion?
What is an appropriate organizational design and structure for the company as it grows?
Are individuals well suited to their jobs and the business?
How does the senior and the founding generation accept “letting go” and turning over the business to the next generation?
How can a business that has never or very frequently planned, develop long-range plans for the future?
If you can’t effectively provide answers to these questions, relax because you’re not alone. The challenge of succession planning is one of the number one issues facing baby boomer businesses today. It is getting even more critical because of the difficult economic environment that exists today. Succession becomes more urgent because a willing buyer for the business might not be easy to find. Even if they are a willing buyer, they might have difficulty finding the financing to close a deal.
My advice to first generation owners of family-owned busineses to get the help from people capable of helping navigate through these difficult waters. There are no easy answers and spreading twinkle dust won’t get the job done. It will cost some money and it will take hard work. But when you think about the most valuable asset in your estate it is important to realize that failure to address these challenges could result in the tax man getting a significant chunk of your value instead of your heirs.
Another issue that needs to be addressed is what happens if the owner becomes disabled or incompetent? An effective succession and transition plan now becomes worth its weight in gold. Stuff can happen so it makes good sense to be prepared.
I think that if business owners haven’t done this work they should make a New Year’s resolution to begin this important planning work and get someone to help guide them through the process. For any CPAs reading this post, I would bet that you have clients that fit this profile. If you are not confident in your ability to guide clients through this process go locate another CPA who has experience and specializes in doing this work. Your client will thank you.
Well, I have rambled enough for one day but I hope you understand the urgency of this challenge. We’ll share some additional questions and situations in future posts together with thoughts on the process we use to guide clients as they plan their transition.
