Four Critical Tips for Small Business Succession Planning

When you have put a lot of energy, resources and time into building your small business from the ground up, you might like to imagine that you’ll continue running it for the rest of time. Deep down, however, you understand that this is unrealistic. This is why you need to consider business succession planning now. Whether you intend to pass the business on to a family member or to sell your company, you need a succession plan. This helps to contribute to the long-term business viability. It also increases the chances that you will have sufficient funds in retirement to support you as well as to continue the business that you have fought so hard to build. The longer that you wait to conduct your succession planning the harder it will be to take action. Here are the four most important steps for getting started. shutterstock_164213294

  1. Involve your family. No matter what vision of the future you hold, you need to think about your relatives in terms of succession planning discussions. Are there any individuals already in place who may want to take over when you leave? You should also consider who is qualified to step in.
  2. Create an exit strategy in your business plan. More than likely you already have a business plan for the next couple of years. Your succession strategy and exit strategy should also be included in this plan.
  3. Put together your team of advisors. There will be several different people you need in the process of doing your business succession plan, such as an estate planning attorney, a business partner, succession planner, and an accountant. They can help guide you through the complex process of succession planning.
  4. Identify and prepare to train your successor. Once you are seriously contemplating what lies ahead for the future of your company, you will feel more inclined to help choose the right individual to take over after you leave. You need to carefully consider individuals who already have the qualities and begin to put in place a training program to prepare them for the future.

Time to Sell Your Tech Company? Keep These Tips in Mind

There are many different factors that can trigger the discussion about selling your much-loved tech company: nervous investors, sudden success, industry consolidation, or burned-out founders. As you may approach this point what seems like suddenly, it’s a good idea to carve out some time to carefully thing about the strategy and process.

Be Realistic About the Valuation

The value of bringing in an outside person to value the company cannot be overstated. You need to have these expectations set as early as possible so that there is no confusion or disappointment down the line. A lot of tech companies gave factors outside of financial metrics to consider. Some of the elements that should be considered in a valuation are the value of your existing team, valuation activity in the space in general, and the possibility associated with outsized demand.

Set the Stage for the Company

There’s no point in talking about a sale unless you’re crystal clear on your processing. Financial statements should be clear and recently-produced. All documents for hiring purposes should also be clear and filed, such as non-compete agreements and IP contracts. shutterstock_252909271

Evaluate Funding Options

There are a wide range of investors available to tech startups: venture capital, angels, accelerators, crowdsourcing, and the list goes on. These all have different requirements and goals, so make sure you factor this into your exist as well.

Got questions about succession planning? Contact our office at info@lawesq.net

Tech Company Top Succession Planning Tips

It’s not just tech companies that should pay attention to succession planning these days. In fact, increasing salary expectations, highly specialized skillsets, and lengthy searches for the ideal candidate are not isolated to the tech sector alone. With a major shift in demographics due to generational changes, a lot of companies are experiencing what’s known as a “leadership deficit”.

The good news is that with a little planning and foresight, leadership deficit doesn’t have to be a major challenge facing your tech company. shutterstock_331440044

 

First of all, don’t be afraid to break the mold when it comes to succession planning. Technology startup founders are usually the types to do it all, handling responsibilities like identifying additional markets, handling operations, leading development of strategy, and contributing to new technology. This means there are big shoes to fill when this person leaves.

Narrowing in on the skillsets you’ll need in the future, as opposed to those you used in the past, can help chart a better future for your company anyways. Beyond the start-up phase, it does not necessarily make sense to have a leader who handles everything. Keeping operational stability or attracting top talent, for example, may be more important qualities as the business evolves.

Succession planning is about more than who will replace the person at the top. Especially if the company ultimately goes public or is in a position to be acquired, management stability should be a common thread that goes throughout each of the units in the business.

Finally, don’t have a narrow scope for the pool of candidates. With the market the way it is, you should have multiple potential candidates to replace individuals in each position. This gives you some flexibility so that the unavailability of one candidate (or unrealistic salary expectations) don’t throw a wrench into your entire planning process.

Tips for Selecting a Successor to Your Business

 

In many cases your business successor could be selected by default. If you have a family business, for example, there is likely one member who is more qualified, interested and active in the business than others.shutterstock_158522279

In this situation the founder might have already spent a good deal of time grooming the successor for this situation. In this particular case, the challenge for business succession planning has to do with treating the other siblings or non-participating family members equitably. Able founders need to be prepared for how to pass along their precious creation to successors who have worked hard to take on the risks associated with it.

If succession has not already been determined by birth order, interest or proximity, it may require a group effort to select and groom an individual. Individuals who are not family members could even be recruited onto this transition team. It is unlikely to be successful if you opt to divide power between competing children because it can generate a great deal of conflict and impact the business negatively in terms of finances and management. Careful business succession planning requires thinking about where you have come from, where you are now and where you would like the business to go, and then evaluating various individuals who may fit into the roles associated with that business.

What Are The Pitfalls In Transferring Power In A Family Business?

There are many different issues that affect a family business such as climate, laws, technology, economic trends, competitors and employees. But the family business is also influenced by anything that impacts the family unit itself like skill levels, various interests of the stakeholders, marital status, the level of business participation for each person and the relative health of all members.shutterstock_165121328

Handling transfer of power while balancing this climate can seem like a juggling act. This is especially true if the founder is hesitant to give up control or if the successor is not well prepared or interested in accepting it. The major issues facing a family business owner looking to transfer power to others are timing the transitions, selecting the appropriate successor, managing inter-generational conflict, providing adequate training for the successor, and ensuring a smooth transition period.

All of these can be important for the family business owner who is looking to pass on his or her company. Even if you are not planning to pass on the family business for several years, it’s a good idea to have your plans in place now in case a sudden disability or death were to alter them.

Tips for Small Business Owners Who Have Ignored Their Succession Plans

Many small business owners know the struggle of keeping track of multiple priorities working long hours and taking risks. However, even the most successful small business owners can be tempted to drag their feet when it comes to business succession planning. Some of the most common reasons for this process being skipped over are that succession planning is seen as emotionally difficult, time consuming, complex and expensive.shutterstock_62360050

Without a business succession plan, however, you are facing a lot of risk if you do someday hope to have your company survive you or to sell it for a fair price. There is no cookie cutter process you should approach for business succession planning. The amount of time spent in this process depends on the size of the business and the particular issues involved such as whether or not family members will be taking it on. Do not wait too long to get started, however, because this could prove problematic if something happens to you and you need to exit the business suddenly, having a business succession plan in place can help to avoid the challenges with a sudden departure.

Business Succession Planning: What Are the Values at Work?

A business reflects its owner, and a clear plan can keep that concern on the path that was chosen. Lack of a succession plan could morph the business into something different or leave it in the hands of someone who would not reflect the founder’s intent or attitude.shutterstock_110061932

The type of plan used will depend on whether the business is to be sold or kept until death or retirement. If the business to kept and passed along, use of an outside consultant can eliminate bias in the selection of a successor and that successor could be placed in a similar business to prepare for the future.

If the business is to be sold, there are many options; an outright sale, a buy-sell arrangement for a future date, a family limited partnership, or an annuity arrangement trading your business for a guaranteed lifetime income string.

Make sure you contact a New Jersey business succession planning attorney when you have questions about charting a successful path for your company. Planning ahead can prove to help answer some difficult questions.

Business Succession Planning is About More than a Check

Forbes Asia recently interviewed a fast food entrepreneur in Hong Kong who shared insights into business succession that are universally applicable. Although family businesses account for 80% of the global economy, next to divorce and bereavement, succession may carry the greater stress. The letting go process for an owner can be a real psychological barrier. In any plan, family must come first, then business.shutterstock_123839953

The harmony, relationship quality and consensus is important for any person in planning a business succession. It is also important to consider a family assessment of ages, talents and wishes and this should be discussed in a transparent manner.

This could involve the creation of a family charter which contains defined policies and procedures like values and traditions. It should be kept in mind that psychologically, children may feel they can never step out of the parent’s shadow and may need to pursue their own dreams outside the business.

Business Succession Planning: Challenges of Selling the Family Business

Selling a family business, whether it’s due to lack of succession options, estate issues or the need for liquidity can cause problems as a result of sudden liquid wealth.

Passing on the family business also carries with it needs worthy of great consideration and counsel from trusted advisors. Whether to travel, work or pursue hobbies or philanthropy, the business structure within the family operated will be gone if the business is passed on to someone else and this can be an emotional struggle.shutterstock_321333917

Planning for all life elements should be pursued as an integrated process with defined goals. Investment has to move from the business into diversified streams with clear communication with all family members as far as the consequences of the sale. An individual thinking about passing on the family business should also be aware of lifestyle creep which means increasing spending just because the funds are available to do so.

Business Succession: Twilight of the Boomers

As baby boomers age into their 60s and 70s, more of them are preparing to leave their businesses behind. In order to do this, baby boomers have to recognize that a lead time of at least 3-5 years is actually their best friend in the planning process. This allows you time to carefully consider all of your options and to put the steps in place to achieve success with passing on the business to someone else. Ownership succession in terms of selling outright frees the owner from future risk and locks in financial obligation of the buyer, providing cash to pursue future goals for the baby boomer.shutterstock_82215202

Management succession, which allows the individual to retain some level of ownership and risk, allows for transition into and through management a family and employees seeking the best positions moving forward. The key is that a long range planning option can help to maintain business value, improve employee confidence and cement a family legacy by providing financial opportunity for philanthropy.

Why is Business Succession Planning an Ounce of Prevention?

 

A person given a one-third chance of survival in life is alerted to this fact. But in many cases a person whose business faces the same chances will prefer to deal with the matter later on down the road.shutterstock_320674358

The key in this situation is a balance between business Goals and family relationships as well as balancing emotion and logic.

In the process of conducting business succession planning you should identify the objective first. Is it to sell the business? Is it to give the business to someone? When will this take place? And who will be the key parties involved. After this initial need has been accomplished, it is time to consider the financial need. Does the retiree need business proceeds on which to live and if so, how much and how will these be paid out? And finally, key employees should be kept for the purposes of continuity and employment agreements can aid in this situation, building incentives and using non-compete agreements for structure.

Is Business Succession Planning a Question of Fairness?

It’s very likely that a business could turn out to be the largest asset held within a family. But fairness of how to deal with this in terms of succession planning can arise as an issue if all family members are not involved in the conversation in one way or another. Especially in the event that the business is sold, non-members could be unhappy if they feel as though their distribution is smaller. There are also challenges if full and equal distribution is made because this can place a burden on members active within the business.shutterstock_312773633

One way to handle this situation and to even the playing field is to use life insurance allowing for a gradual buy out of non-members. And this also eliminates concerns associated with managing equal distributions. One of the most important ways to handle this challenge is to sit down with all family members and discuss the potential future of the business.

A business owner could be under the impression that one or more of his children or other relatives are interested in continuing on with the business. But a conversation brings this issue front and center and gives clarity to any concerns. In addition to hosting the initial conversation about how to handle business succession planning, it’s also important for the business to be valued accurately before any distributions are made considering depreciating factors like the lack of marketability.   Contact us today to learn more about business succession planning.

Business Succession: Tying a Plan to Your Vision

Setting a course for the future of your business involves looking well into the future. Difficulties can often act to narrow and constrict your long-term plans, and focus can easily turn to quarterly results and reactions if you are not careful. shutterstock_254049055

When thinking about the future of your business, you need to take time to zoom out from this smaller picture into the bigger one so that focus is once again concentrated on how to grow as well as the people to help accomplish these goals. A wide focus helps receive buy-in from the staff of your organization in understanding that personal decisions will influence outcomes.

Some key questions to consider during this process involve which people may be intending to retire in the next five years, what people are already in the pipeline for future development, and whether promotions would generate position gaps within your company. Putting together a business succession plan should only be done under the experience of an estate planning attorney.

Ready to plan ahead? Contact us for more information.

How an Unexpected Departure Can Impact Business Succession Planning

There are lessons to be learned from the sudden death of David Roth, general director of the Kentucky Opera. Unfortunately, families and business around the country suffer when an unexpected departure raises many questions about the future of a company or entity. Although it can be frustrating to realize the challenges of handling this situation too late, such an event highlights the value of business succession planning in the present for any company. shutterstock_286436105

The first step in such a process is to recognize the loss and begin the communication process as early as possible. Stakeholders should be made aware of potential outcomes of the loss of a key member of the company. Stakeholders might include employees, shareholders, or even donors depending on the structure of the organization. All relevant individuals should know that operations will continue as usual in the interim. From here, the next discussion should be about plans for moving forward and what permanent leadership might look like.

If you’re struggling with starting the conversation on succession planning, we can help get you thinking about key issues and questions to consider.

How to Start the Discussion on Succession Planning

In order to plan ahead for the future and reduce the possibility of problems down the line, you need to think about what you want to happen to your business. The most difficult part of this process is planning the initial conversation and avoiding any excuses or reasons to put this off. Business Succession0915

When you set aside the time to talk with relevant family members or stakeholders, do not let anyone convince you that the conversation should be pushed off or dealt with later. Once you make the commitment to think about the future of the company, stick to it.

It’s essential, though, that you do have buy-in from the people at the top of the company. Your current leaders should already be assuming key roles within the company and that they participate in the process of identifying additional talent and building the structures for the company to exchange hands in the future.

Finally, be sure to hold yourself accountable. As the figurehead, the responsibilities should trickle down to your other employees, but you must be willing to show that this is your commitment instead of just saying that it is. Outlining your goals in an official statement or your company’s strategic documents helps keep you on track with this. Ready to get started but not sure how? Contact us: info@lawesq.net.

Probing Questions for Succession Planning

The prospect of planning ahead for retirement and the possible sale or transfer of a business raises a lot of questions. It is important to consider not only how succession planning affects you, but also how it will affect other stakeholders in the business and any future owners. Review these questions before putting together your business succession plan:

  • Can the business be continued with family members or other employees, with power gradually being given over to them?
  • Are there any other assets in place to help fund retirement outside of the sale of the business?
  • If there are other assets in place, how could the sale of the business supplement and contribute towards those?
  • If there are no other assets in place, is the business in a position to be sold? Do the analytics of the business indicate that there may be interested buyers or positive financial forecasts?
  • If the business will be sold, would the proceeds be sufficient enough to cover your retirement for the remainder of your life? i6CvhRaSJJpF9tl0uUGXDEtGNRFU5shuxQnMJSSZ4LM

All of these questions are important and worthwhile in your approach to business succession planning. Ready to get some help with this? Contact info@lawesq.net.

Business Succession Advice: What to Know About the Unsolicited Offer

If someone comes to you seemingly out of the blue to make an offer on your business, tread carefully. Although this can seem exciting, you need to carefully vet this individual and determine whether it’s the right fit for your business.shutterstock_253802632

One of the biggest problems with the unsolicited offer is that it pulls attention away from running a company into selling one, because the offer of stepping away from routine and receiving a large sum of money can be very tempting. Large industry firms that make these offers could contact dozens of firms with the aim of never providing a price and instead stringing out the process long enough so as to receive a discount.

If you’re considering this unsolicited offer, be proactive. Request a confidentiality agreement and a clear letter of intent from the buyer. This is simply due diligence on your party. If the buyer balks at your requests, you can point this person to discuss future offers with your firm’s specialist on mergers and acquisitions. The remove yourself from the game without any further losses of time, energy, or personal information about your business. Contact us for more advice at info@lawesq.net.

Why is Family Business Succession Planning So Difficult?

Business succession planning is difficult to begin with, which is why so many people avoid doing it at all. That’s not a good approach, however, because poor planning could turn into a real problem down the road. When it comes to businesses owned by a family, it seems like this one area where multiple challenges make it harder than ever to have the planning conversation. shutterstock_143515135

There are many factors involved in why family business succession planning often takes a backseat. First of all, there’s a smaller pool of potential successors. Sibling rivalries can inflame arguments, especially when some siblings want to stick with the business and others want to move on after the parents have exited the company or passed away. Larger generational differences between stakeholders is another reason why it’s hard to figure out the future of a family business.

Finally, there’s a strong connection between family and work for anyone who works in the family business. Without proper care and planning, this can lead to more emotional conflicts at work and at home. That being said, you can minimize future conflicts by planning ahead and thinking especially about how you want your legacy to be carried on. Need help? Email info@lawesq.net.

What to Do When You Need to Exit Your Small Business Quickly

Certainly, planning ahead for a small business exit is a wise decision, but it’s not always an option. Sometimes, business owners need a quick exit for one reason or another, and putting forth a quick plan of action can be crucial to following through properly. 5HeZmh6ZnnsYGxPbT0bM2RzZFsLirU3oUPu_Hs2PNxM

New research from BizBuySell.com reveals that the time to sell a business decreased by 23 percent recently, from 200 days to only 153 during the final quarter of 2014. Five months, though, may be too long for some business owners who need immediate action.

In case this describes your situation, here are five steps you can take for immediate action to sell your business, according to inc.com:

  1. Contact potential buyers. As a business owner, you might already know interested parties.
  2. Incorporate a business partner. A business partner could help manage portions of the business you’re not interested in, giving you more time to find the ideal buyer.
  3. Pass on the business to employees. Creating an Employee Stock Ownership Plan gives you more opportunities and helps you move forward a sale more quickly.
  4. Provide incentives. The more attractive you can make the sale opportunity, the more likely you are to sell it quickly.
  5. Liquidate assets. While this is certainly not going to be your first option, it is a potential one if you find you need to exit quickly without taking a huge financial hit.

Need help planning ahead or in crunch time with a business sale? Contact our offices today for a consultation.

Why You Need a Business Succession Plan

It’s so common for small business owners to love their work so much that they it might not even be on their radar to think about retirement. As a recent inc.com article points out, though, you might be tempted with an offer you can’t refuse at any point in your business. Are you prepared if someone offered you a buyout? shutterstock_129614795

Even if retirement is not on your radar right now, you should always be thinking about the long term. Since it could take several years to put a succession plan in place, here are five key steps to take to ensure you’ve thought about all the details big and small.

#1: Start Training a New Team or Manager

It’s never too soon to start the process of tapping the next round of talent.

#2: Document Your Plan

Contact your business succession planning expert to make this happen

#3: Consider Your Backup Plan

Simply put, things don’t always unfold the way that you expected. Make sure you’ve got a Plan B in place just in case.

#4: Hire the Right Accountant and Legal Team

Since your plan might evolve over time, make sure you’ve got a plan in place to get the right advice when you need it. Schedule regular checkins.

#5: Think About Your Own Exit

You’ve got to think ahead about the exit as well- so don’t focus on just team member actions. Consider how your life will change once you exit the business, and prepare yourself for the transition.

Thinking about business succession now? Contact us at info@lawesq.net.