The Succession Plan

Generally, for a succession plan to work, the main concerns about death, disability, and retirement must be addressed early and often. However, please do not ignore the potential for catastrophic loss of principal family members or key people. Therefore, create a plan that addresses the following questions:

·         Who is going to operate the business, make day-to-day decisions, pay bills, sign checks?

·         Who is going to own the business, and in what format?

·         What steps must be taken to ensure continuity, and which advisors need to be brought on to the transition team to make sure it happens?

·         Has the business buy-sell agreement been updated, and are realistic valuation techniques in place?

·         Is the buy-sell agreement properly funded?

·         Will there be adequate liquidity to continue to operate the business when the founder steps out of the picture and still provide for an equitable distribution of ownership interests?

·         Will non-operating heirs be satisfied with reinvesting the profits back into the business to expand? (If not, managers face a shortsighted process of carving out value for income.) Or will heirs take the first good offer for the business and head to warm and gentle climates?

·         Can the operating heirs buy out the others in a fair exchange of value for control?

·         Can all this planning be done in a tax-efficient manner without disrupting the business?

·         If there is a family heir anointed as successor, does this person have a grasp on the business operation and its employees, suppliers, credit worthiness, and customers?

·         Do the heirs have the capacity and training to make decisions and keep the company moving forward with the full confidence of the other family members? Alternatively, is there a key employee or outside manager available to hold the business together? 

 Most companies fail within a short time of their inception. Family-owned businesses have a tradition of being more durable, but it takes special care and a lot of extra effort to overcome the hurdles and succeed for the next generation. Start the process early and you’ll be able to preserve a lifetime of family work for the future. 

Decide to action today. Talk with Ohio business coach and Certified Exit Planning Advisor, Ralph Berge. Call him 440.838.0991.