Many business owners still refuse or delay business succession planning even in the face of statistics we shared in a previous blog about how critical planning is to the continuity of the business. I’m reminded of that Benjamin Franklin quote, “By failing to prepare, you are preparing to fail.” Of course, no one believes their business, grown with such devotion, care, and hard work, will become another statistic. However, almost 100% of the time, businesses don’t transfer to relatives naturally and easily without formal plans in place, let alone without estate-planning documents for tax advantages.
Over the last nearly 20 years, experts at First Business Bank have guided business owners through the process of business valuation, succession planning, and estate planning to help ensure that their businesses continue to prosper after their eventual retirement or in case of an unplanned event. As you can imagine, we’ve encountered plenty of resistance along the way. Here are the top five common objections to business succession planning, in no particular order, and their counter-arguments:
1. It Will Cost Way Too Much
Either you absorb the time and fees now to direct the succession planning to help ensure the business outlives you, or your heirs will pay dearly in the future. Professional fees associated with designing and implementing a business succession plan usually are far lower than costs associated with administering an estate or transferring a business without a formal, written plan in place.
2. It Will Drive My Relatives (or Employees) Apart
Postponing or even failing to plan business succession does allow business owners to avoid potentially difficult conversations with those who have the most stake in the company or the estate. However, those conflicts don’t magically disappear when you retire or pass, and can escalate and become financially devastating. Putting the best interests of the company first and consulting a specialist can help you make a plan that addresses these.
3. I’m Too Busy
The energy reserves of business owners and their staff often is unequaled. I work with owners and leaders who return emails at all hours of the night. And, I’ve found that the smaller the business, the more hats you’re wearing, thus the more valuable you are to the company. What happens without you? Suddenly, successful business transition and transferring the maximum value of the business are both in peril without a plan.
4. I’m Not Ready
As humans, we look at the week ahead and plunge forward with the here and now, tackling the to-dos in front of us. Age is just a number, and so many business owners enjoy working at their businesses, and aren’t really sure what they’ll do in retirement. Even if you don’t have your first gray hair, you can still take advantage of the benefits that come along with succession planning, such as tax-efficient investments, and also take most advantage of current tax laws.
5. My Family Knows My Wishes
Unless your wishes are to dissolve your business upon your death, you’re better off expressing them through a formalized plan that considers your personal and business circumstances. Family disharmony often results from the ambiguity that commonly takes hold after a business owner dies without a true plan in place. Do you have an original excuse of your own to delay or avoid business succession planning? I’d love the opportunity to refute it, and to show you how a plan can help your specific company bridge the gap into the future and strengthen its financial outlook.