Business Succession Planning, sometimes referred to as Business Continuation Planning, is a business owner’s strategy for his or her eventual exit from their firm. Peter Drucker, a well known business author and investor, stated “every business owner gets into business to get out of business.”
What does this mean to the business owner? The point is that from the beginning of the enterprise, a business owner should be considering how best to transfer the business in some manner that will bring them the highest value for their financial and sweat equity in a tax efficient manner while allowing for the continuation of the enterprise into the future.
ABI guides and quarterbacks the business owner’s professional team, normally consisting of other key advisors such as attorneys, CPAs and financial advisors, in determining a company’s business succession strategies at a given point in a firm’s maturity cycle.
A start-up firm has different exit strategy concerns as compared to a long-established business where the owner is beginning to contemplate enjoying his or her golden years.
There are many succession strategies, often several should be brought into play to cover different contingencies. Some of these strategies include:
- Gifting the ownership interest;
- Sale to top management or key employees;
- Employee Stock Ownership Plans (ESOPs);
- Buy/Sell Agreements;
- Sale of the business to third parties;
- Sale of the business to family members;
- Sale of the business to a competitor or vendor; or
- Key man insurance.
There are many questions that revolve around succession planning. These include:
- When do I start developing my succession strategy?
- How can I transfer my business in the most tax effective manner?
- How can I ensure that the transfer of the business is properly financed so that I get my full value while ensuring the purchaser won’t fail due to lack of capital?
- Are there insurance products that can help me in the business transfer?
- How soon should I begin to prepare my business for a transfer?
- What do I need to do to increase the value of my business?
- If you are considering passing the business on to a child or children, when should that planning start?
ABI’s team of in-house experts come from the accounting, legal, investment banking and financial fields and thus bring a wide range of perspectives to the table when aiding a company in determining its succession needs and strategies. Let us help you in preparing for your next great transition.