Family business owners, regardless of industry, share common issues. Most agree that by the end of the journey, they want to have leveraged the work of a lifetime to support their future lifestyle.
Many business owners struggle to figure out what to do with their company and how to plan effectively for the next stage of their life. Either by design or by default, you will exit your business, but it is better to exit the company by design. Preparing for a New Direction:
- As you begin to think about the future, make a list of your options. Think about how you can prepare the company to succeed when you are no longer able (or willing) to work the way you once did. You might decide to work until you reach a grand old age, but make sure that the next generation is well trained, interested and capable of leading the business when you are ready to move in a new direction.
- Your list of potential exit options might look like this:
- Sell the business outright.
- Consider selling and/or gifting shares to a child.
- Consider selling ownership to your managers.
Discuss the pros and cons of each exit option with your family. What do you really need for the future?
- Meet with an experienced estate planning attorney to discuss your options. Many business owners have found that their estate plan may be good for the family, but the arrangement is very bad for the future of the business—such as dividing the business equally among the children, when only one sibling has ever worked and shown interest in the business. An experienced estate planner will be interested in helping you to develop solutions that will be helpful for the family in the short-term and the long-term.
- Pay attention to the value of your business. Consider working with your accountant to complete a basic valuation calculation, and then determine ways to maintain or increase the value. The reality is that as we age, we tend to invest less money into our businesses, worrying instead that we may not have enough money set aside for retirement. This means that just at the time when we need to be increasing the value of the business for a possible sale, the value is dropping.
- Finally, begin building your bench strength now. Make sure that you are adding the right people to your team, and you are training them to do the best job possible. Your management team is a key asset, whether you decide to try to sell your company, or pass the business on internally. This team must be part of your overall plan.
You have worked hard for the company you have developed, and you owe it to yourself and your family to ensure you can leverage this investment of a lifetime. Planning for your eventual transition, in whatever form that it takes, will take time, and the earlier you start, the better.
Source: Stewart, Lisë, March 26, 2018; https://www.homecaremag.com/april-2018/family-business-transitions