After you’ve spent the better part of your adult life building a successful business, what’s next? Many business owners spend their lives so engrossed in budgets, projections, new sales presentations, and managing employees that they don’t look at their businesses from beyond. Said another way, owners spend the vast majority of their time working in the business not on the business. The stark reality is that at any time something could happen to make it more difficult or even impossible for you to continue operating your business.
If you’re like most business owners, you don’t have a plan in place to guide your business past your involvement at the helm. In fact, statistics show that three out of four business owners don’t have a succession plan in place, yet many of them believe their businesses will naturally transfer to family members. Sadly, the reality is that only about 30% of family businesses survive into a 2nd generation and only about 12% of family businesses continue into the 3rd generation.
Planning for your own retirement and addressing potential uncomfortable situations is commonly put off until the very last minute. Who wants to talk about how children might operate the business together? Or what, if any, ownership should an uninterested adult child receive compared to the child who is active in the business? Yet, if you want to preserve your business, these discussions are important. A professional third party can help you navigate the issues, explore the transition planning options and discuss the financial and tax related aspects of transitioning a business.
A comprehensive business succession plan provides:
- Security: It’s a roadmap that addresses sudden events as well as planned transitions.
- Flexibility: A correctly planned business succession is revisited frequently, resulting in a living and breathing plan that you can update as circumstances change.
- Backup and support: It allows business owners to manage change and put several priorities, such as business continuity and family financial interests, in line.
- Peace of mind: An expertly created business succession plan is the result of a coordinated effort between the team of trusted advisors and the owners of the business.
- Consistency: It is coordinated with the owner’s estate and financial plan for optimal efficiency.
No matter your age or how long you’ve been in business, a business succession plan is an important instrument to ensure your creation and legacy survive any inevitable scenario.