Succession Planning

Careful planning helps to ensure that your business succeeds well beyond the first generation of ownership. 

What is succession planning?

Why do I need a succession plan?

Unfortunately, most business succession plans simply do not exist, not even in the mind of the business owner. In our experience, for the first 10 to 15 years of a new business, the owner is too busy with day-to-day operations to plan beyond the next payroll. Are there exceptions? Sure, but we don’t come across them very often.  

A skilled financial advisor can help business owners understand the importance of building a succession plan.

This is not a question of protecting the owner’s family during the ownership of the business. That’s often done through life insurance, medical and disability insurance, 401(k) plans, etc. with lawyers, accountants, and insurance agents to lead that charge. With business succession planning, what’s needed is someone who can bring this all together, integrating the expertise of the client’s advisors to develop a more formal succession plan.

What is a succession plan? 

It’s an answer to the “what ifs”? What if this were to happen? What if that were to happen? It answers what happens in the event of a death, disability, or other situation, who, if anyone, can continue to run the business? Is there someone in the business we can treat as a key employee? Is it a family member? If there is someone, will their goals align with the owner’s and, if not, how do we get them to take an interest in the possibility of becoming a future owner?

Maybe it will take a phantom stock plan, a buy sell agreement, or stock redemption. If this is the case, how will it be funded? Does the business have enough internal cash flow to fund any form of buy-out? If not, maybe we need additional life insurance owned by the business to complete a redemption in the event of the death of an owner? Can the spouse or partner step in and run the business after experiencing a traumatic event?

These are the kind of questions that need to be addressed. A financial advisor can provide the guidance and direction to take everyone’s expertise into consideration.

If you’re interested in discussion a succession plan for your business, contact us. There are no fees for our initial consultation.

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