What do football coaches and business succession planning have in common?
Why might most football coaches be sound business succession planners? They understand that sketching out a solid game plan is important and needs to be revisited from time to time.
As a business owner, you may believe that you have your short-term and long-term business planning pretty well in hand. You may think you don’t need additional help — particularly relative to the succession of your business and how you plan to exit it. I’m not talking about whether or not you’ve identified a “back up” person or a business buyer. I’m talking about succession planning in broader terms to mean — have you thought about “how to” accomplish a smooth transition and “how to” secure an appropriate sales price.
Here are a few X’s and O’s questions to mull over:
DO YOU HAVE A BUSINESS SUCCESSION PLAN?
Start planning for transitioning the business early. Five years in advance is good; ten is better. Here’s a scenario – If you’re away for an extended period of time, would your employees and key executives know what to do as it relates to carrying on with business activities?
IS THE PLAN WRITTEN DOWN?
Let’s revise the scenario a bit – If you’re away for an extended period of time, is there a road map which states what should happen with the business? It’s important to have your plan documented so there is little misunderstanding regarding next steps. This is similar to why wills are established. If your business succession plan isn’t written down, there’s no way to ensure your business continues without interruption.
HAS THE PLAN BEEN REVIEWED LATELY?
Time can change many things. In order for your succession plan to be effective, it must also be reviewed regularly and updated to reflect any company changes, industry or market developments, changes in tax laws, changes in valuation, etc. Family owned businesses have a poor record making it to the next generation. Why? Maybe the business was sold to generate enough funds to pay estate taxes. Maybe key employees left when the founder died or left the business. Perhaps surviving family members had contrasting desires regarding what to do in the future; whether to continue the business or cash out and walk away. Whatever your situation may be, it’s important to update and adjust your business plan to take into consideration the current value of the business, family dynamics and to help minimize taxes.
HOW IS THE PLAN FUNDED?
Business succession planning can be funded with life and disability buyout insurance. This is one area where the fluctuation of stocks and/or bonds may not be desirable. In this instance, insurance can provide some degree of certainty.
HUT, HUT, HIKE! FORMULATE YOUR GAME PLAN
No matter how adept you are at running your business — at formulating your game plan — it might make sense to huddle up with second or third opinions. A financial professional can provide guidance and clarity helping you move the chains toward improved financial confidence.
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2021-130691 Exp. 12/23