The Time for Succession Planning Was Yesterday

Posted by: Rod Kurtz on January 1, 2010

Ever wonder why so many small businesses never survive the owner’s death? Entrepreneurs often get so involved in day-to-day management of their baby that they never contemplate what would happen if they were no longer around. Planning for succession is a critical strategy for business owners who want to leave not only a lasting legacy for their years of hard work, but also financial security for themselves and their loved ones.

The key, of course, is to begin the succession process well before retirement is contemplated. It takes time to determine if the kids have the capability or desire to take over the family business—or if a key employee shares the vision and ethics the founder inspired. And it most certainly takes time to install a funding strategy that can provide the resources necessary to compensate the owner adequately when he or she is ready to sell.

Structuring a proper succession plan takes considerable thought, which is another reason why so many small business owners procrastinate. Does your plan address a catastrophic event, like the sudden death or long-term disability of the owner? Continuity planning is a key component to any sound succession plan. Does it provide a written formula for adequately valuing a business that would pass IRS scrutiny? Is a buy-sell agreement in place to lay out the parameters of any transition, and are all parties aware of the tax ramifications? If children are involved in taking over the business, how does the owner equitably deal with those kids who can’t or don’t want to be part of the business?

Like most things in life, there’s no quick fix when it comes to an effective succession plan. So if you want to maximize the legacy your business leaves behind, the time to start planning was yesterday.

Greg Merlino
President and Founder
Ameriway Financial Services
Voorhees, N.J.

Reader Comments

jaderdavila

January 3, 2010 6:43 AM

the small shareholder can profit:
the small business is simply someone that could not find a job.
and made one for himself. the gathering of savvy, dedication to the client and awareness of what's going on around is fully personal. being the child, the partner or a friend of such a person does not guarantee that you have that savvy. the world has a tendency to each person be a small business. having an employee is too dear. unhappily that savvy can not be passed to other person. when the owner dies the savvy dies with him.

Becky

January 11, 2010 2:18 AM

John Warrillow,former owner of Warrillow & Co., was in the business of advising Fortune 500 companies on the needs of the small business market, has come out with a new book (it will hit the shelves on Feb 1), titled, "Built To Sell: Turn Your Business Into One You Can Sell." I had the opportunity of previewing it and found it to be extremely valuable in helping me prepare a plan, should I ever decide to sell it- which I most likely will. One thing I loved is the fact that you can go to the books' website and find a great tool called the "The Sellability Index,” where business owners can take a 10 question survey to see if they have a sellable business and if so, how much money they could get for it.

http://www.builttosell.com/speaking.php

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