Over the years, my experience with many owners I have found a major conflict with owners is the working in their business vs. working on their business. It is extremely hard for many business owners to make changes and spend the necessary time. I have a book called “Unlocking Your Business DNA”, which discusses the personal tragedy of not having the proper planning.
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I have heard the stories from “I will live a long life”- “I need to work and won’t retire” “No one can do this like I can”
Four possibilities of leaving your business:
- Death (that includes dropping dead at your desk)
- Disability
- Retirement
- Cannot do it any longer
By not planning, the owner may find themselves receiving much less for the business, walking away without any value, or just die working at their “bench.”
Because of this one reason, we developed the two hour a month planning process, called: THE ONE PAGE PLANNING PROGRAM.
The Owner AND Their Issues: What is important for the owner is to have a personal retirement and estate plan to define their future needs. Do they want to stay active in the business even when retired? Will they have enough money for retirement? Will they have estate tax exposure. Do they have the proper estate documents? Do they have someone to sell the business too? How much will they have to sell their business for to net the amount of assets needed to provide their financial security?
Owner Issues
- Financial Security
- Wealth Preservation and transferring the business with as little taxes as possible.
The Family: What is the status of the family relationships in the business? Do any of the family members depend on the business for income? Do they own stock? Are they in agreement with the proposed succession? Are their careers involved with the business?
Key Issues for family
- Compensation among family members in the business?
- Inheritance among family members?
- Management of family business, who is involved?
The Company.
- What are the assets in the business? What is the value of the assets? What is the value of the business?
- Has the company been appraised in the last few years?
- Is the buy and sell agreement in force-signed and dated?
- Does there need to be more formality in the governance of the structure?
- Has there been a systematic attempt to enhance business value drivers over the years?
- What is the structure to get earnings out on a tax advantage structure?
- Who will be the leader of the company, and will there be a change in ownership?
The Succession Plan
- Business Situation and questions when thinking about succession.
- How are you getting earnings out of the company on a tax advantaged structure?
- Have you considered the leadership and owner issues to be addressed?
- Each entity structure has advantages and disadvantages, and each should be looked at carefully when considering your future status as you transition?
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Your Business Worth 