Business Should Continue by Plan, Not Chance.
"Fewer than 30% of family owned businesses survive to the 2nd generation" (Joseph Astrachan,Ph.D.,editor, Family Business Review)."Only 26% of small business owners have some type of succession plan in place" (LIMRA International, Small Business Owners 2005, Report).
The most important thing an advisor can do for clients in the succession planning process is to get it started. Many business owners have "plans" in their minds about how the business will continue; often the critical step in the process is getting the ideas out in the open.
Questions That Should Be Asked
- Are the prospective new owners ready and able to manage the company?
- How will the employees react to new management?
- Will the employees feel secure and remain with the company?
- What will happen to the relationships that reside primarily with the outgoing owner?
- Is the owner ready to exit?
- How will the family deal with the transition?
Without Proper Planning, Situations That Could Arise
- Banks could call in loans
- Children might become adversaries with key people in management
- Key employees might leave
- Spouses could make irresponsible economic demands (and if the owner's personal matters hadn't been addressed, former spouses)
- Management may be forced to make poor business decisions in response to new owner demands
National Benefits Group Can Help with Succession Planning
- Set real personal goals: Establishing well-defined and written objectives, within the scope of what can be done in transition, will provide both the direction and latitude in creating and implementing a plan that can turn goals into realities.
- Create consistencies across parties: Disagreements between buyers and sellers have the potential to wreck an otherwise viable business.
- Address financial, tax and legal issues: Succession planning is a multi-disciplinary process that will include many different advisors and a number of factors.
- Follow through: It may take as few as a couple weeks to set up the plan, but the succession process may take years to see it through to fruition. Unfortunately, plans are often drafted but never implemented. Owners may get side-tracked or even derailed with the demands of business and family.
Securities offered through ProEquities, Inc., a Registered Broker/Dealer, and member FINRA and SIPC. NBG is independent of ProEquities, Inc. FINRA's Broker Check