Estate planning involves many vital areas, but business succession may get neglected. If a business owner would like to keep the firm securely in the hands of his children, he or she needs a detailed plan. Experts suggest it takes about 10 years before retirement to train the right person to take over the reins.
The problem in creating a business succession plan is that the owner will “get around to it” in time—but the time never opens up. As business owners know all too well, running their own company eats up every waking moment. Planning for the future of a business is obviously important. But how will the owner find the time necessary to accomplish such a large project?
Call in the professionals
The good news is, a business owner doesn’t have to create a succession plan alone. People who need a new roof call a roofing company. Those who want an addition to the house call a residential building contractor. The point is, experienced estate planners can advise family business owners. They have the knowledge and experience to create a sound business succession plan; meanwhile, they allow the owner time to continue doing what he or she does best: run the business.
Do not put off this important task
Life has a way of delivering surprises, mostly at inconvenient times. A business owner may believe he or she has years to come up with a succession plan. Then disaster strikes. Perhaps the owner suffers an incapacitating event. Without a succession plan in place, the owner has no guarantee that the business will continue to survive or remain profitable.
Even if family members step in, do any of them possess the aptitude, willingness and forward-thinking vision for future growth? If so, that person should be in charge. Unfortunately, being suddenly thrust into running a business can leave family members arguing over the role of leadership. The best-qualified person may not win. Bitter siblings can quickly sink a business, not to mention risk permanent alienation through litigation between family members in a fight to gain control of a company.
Build the bridge to ownership
While the business owner is active in daily operations, the time is optimal to build a bridge from the current business leadership to the younger generation. Planning now for succession will also maximize tax advantages. If an owner already knows which of the children would make the best leader, the owner can avoid hurt feelings among the rest of the children by setting up nonvoting shares equitably divided among all family members.
Another essential task is for the owner to provide for his or her retirement income as part of the succession plan. Starting a business succession plan now allows the owner time to train the new leader and gradually ease out of the stress of everyday business affairs. The owner deserves to enjoy some time on the golf course with confidence that company operations are moving ahead successfully under the capable hands of the best family member for the job.