In business succession planning, time is either your ally or your enemy. You can spend time planning for succession during your active business lifetime, or postpone planning and wait until the more chaotic, uncertain and expensive succession planning occurs post-mortem, when the choice is no longer yours.
Finding a willing buyer for any business is rarely just a matter of hanging up a “for sale” sign. Buyers are not necessarily prepared to wait until the time is right in a business’s life cycle before making an offer.
Naming a successor means much more than simply indentifying who will inherit the business. It’s also preparing that successor, which may require a long apprenticeship so he can learn all the operational tasks required by the business.
While many things can be guaranteed in a successful succession plan, happiness amongst all family members isn’t one of them. Simply dividing the business equally amongst all eventual heirs may seem like the “fairest” solution, but if some heirs have put more into the business than others, they may not see it that way.
Too many business owners see a succession plan as “all or nothing”—that changing ownership necessarily means giving up control and reducing income. However, it’s entirely possible to create a succession plan that transfers business ownership to an eventual successor without losing control or income or—as is vitally important to many business owners—the continued opportunity to build a legacy.
In his recent article, David Scott highlights 5 common misconceptions about succession planning held by family business owners, as well as some solutions as to how to dispel them. Read the full article here.
No mention of an ESOP as a succession planning method which could provide significant tax benefits for both the company and the selling shareholder.
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