A business succession plan is usually more difficult than putting together a great business plan. In fact, nearly half of small businesses without an exit strategy simply believe it’s not necessary.
Sometimes a business succession plan isn’t perfect.
A golden retriever named Duke guards the secret family baked beans recipe.
Fourth-generation Bush Brothers board chairman spills the beans about their succession planning, and then cooks up a new favorite,
Bush’s Grillin’ Beans.
A recent survey found that just 23% of family companies included have a strong, written business succession plan. Nearly half of family businesses owners were reluctant to pass the business on to the next generation. Most family-owned businesses have some succession plan for some senior roles, but most aren’t fully developed or sustainable over time.
Why doesn’t an owner make a business succession plan?
The pace to remain competitive is fast, and business owners simply don’t have time to think about who will replace them. Older business owners aren’t retiring and aren’t thinking about the possibility of disability. Other owners don’t allow enough time for a smooth transition of power.
Many business owners don’t want to give up their life’s work. Some business owners don’t know who should prepare the plan. Others are confused by government regulations.
A business succession plan isn’t always easy.
Generational transition is difficult. Family members often can’t face the thought of losing a loved one and talking about is painful. Only one out of three of all family businesses successfully make the transition to the second generation.
Family members can also have very different financial interests. An older family member is often looking at retirement income. Younger family members may be looking at investing for growth.
If there are buyout agreements, establishing the value of the business and the value of individual interest can be challenging. Complications can arise if there have been divorces. The death of a family member who leaves a surviving spouse owning stock could also make a sale or buyout difficult.
As your CPA and tax professional, we take care of the business of your business. We know how to help you make a solid, strategic business succession plan. Let’s talk about these steps to help you and your family take the family business successfully into the future:
- Focus on goals, not tactics. A strategic plan establishes the company’s goals and direction, while a business plan lays out the tactics needed to pursue the goals.
- Invite input. People are more motivated to achieve goals that they helped create.
- Be prepared for change. After examining the goals, you may discover that different approaches are needed to roles and the way the business operates.
- Set a timeline and assign responsibilities. And provide those assigned the resources to accomplish objectives.
- Measure and adapt. Set key performance indicators to help in evaluating progress.
- Communicate. Share both the plan and the progress you are making toward accomplishing it. This can help build momentum toward your goals.
What’s the bottom line?
It’s your business and we’re here to help you.
Contact Melanie Radcliff CPA, Inc.