Note to the Reader: Recently, we published a letter urging businesses to prepare for natural and man-made disasters. We touched upon business succession in that issue and we would like to further your knowledge of business succession by detailing exactly what is involved.
What is the most severe threat to the existence of your business? Some may answer “my competition”, or “income and estate taxes”. Even others would answer, “rising costs”. While these are good answers and are concerns in day to day business operations, there is one issue that overrides everything else regarding threats to your business.
The number one threat to your continued going-concern is quite simply the lack of a Business Succession Plan. Most business owners do not understand the problems that not having a Business Succession Plan will create, nor do they understand the solution to the problem or how an actual plan is created.
Recent research reveals some startling truths:
- Most closely-held businesses are owned by one shareholder.
- A majority of businesses do not have a full and active Business Succession Plan in place.
- Fewer than half have a successor in line and prepared.
- More than half of business owners in the United States are 55 years of age or older.
- A good percentage of the owners are 65 years of age or older.
What does this say about the condition of private American businesses? What does this say about the position of business families? Without succession planning, it is a near certainty a great portion of the business value will be lost if the “leader” passes away without a Business Succession Plan.
It is critical to understand that a Business Succession Plan will take time to implement. It is not a day long or hour long process. A number of steps (described below) must be completed in order to receive the maximum value for a business and make the transition as smooth as possible. Specially, below is the procedure that our office, The Center for Financial, Legal & Tax Planning, Inc. follows in creating a Business Succession Plan for owners of Privately Held Companies all over the United States.:
The first step is for you to make sure that we have a complete understanding of the financial status of the business as well as your personal financial status.
Our office then reviews that information (at no cost to you). This process usually takes us about 1 week.
We then have a phone call with you (up to approximately 1 hour in duration) and discuss the results of our review of the information as well as the details of what we expect to accomplish. Again, there is no cost to you for this phone call.
Shortly after that discussion, we will send you a detailed itemization of the proposed project complete with our Engagement Contract, an estimated fee structure for the project and a requested retainer amount, and any other documentation.
After we receive the signed contract and retainer, we like to make our 1st of at least 2 on-site visits to your location. This date is usually scheduled within 4-6 weeks.
At the first onsite visit – we assist you in gathering and reviewing the information.
We then complete a draft of the written Business Succession Plan and typically we also are completing a draft of the Valuation of your business during this time. This takes approximately 4-6 weeks after we have completed the 1st on-site visit.
The 2nd onsite visit then takes place, and the now written Business Succession Plan are reviewed. During this review, we agree on the parts of the plan that you are ready to move forward.
We then complete the final and draft all of the necessary closing documents and the final onsite visit then takes place and we review the final Business Succession Plan and execute all of the necessary closing documents.
By: Roman Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors