The first step is simply getting the planning process started. Many failed succession can be attributed to the inability to begin the planning process in earnest.
Early planning is not only useful to plan for the possibility of future calamities, but also allows clients and their families to reap the greatest possible rewards from in the event of future successes.
With complex projects like succession planning, it’s easy for the client to become discouraged, and it’s the advisor's responsibility to keep the client engaged in the planning process. For example, prioritizing projects so that the simpler tasks can be completed first will allow the client to feel he’s accomplishing something.
Business succession planning is too complex to be successfully accomplished with just the client and the estate planner. Rather, it requires a team of advisors. Critical to the team is someone who has a long-standing relationship with the family.
Providing clients with a realistic picture of the ultimate outcome and the difficulty of the planning process can help prevent dissatisfaction and frustration.
Ascertaining key stakeholders and conducting individual interviews can help provide a clear picture of the concerns and desires of those involved. It’s important to include the founder’s spouse, key employees, children and even the children’s spouses.
The desired outcome for the succession of any business is a plan that can be deemed successful by as many of those involved as possible. But, how is success defined in this area? Because so much of succession planning is determined on a case-by-case basis and because no two succession plans will likely be identical, advisors should remain flexible in their idea of what success will mean for each family.
Because every family is different, searching for a solution shouldn’t be about using a cookie-cutter approach, but rather should entail evaluating a toolbox of planning options.
Hiring someone to objectively review the business to evaluate the skills and qualifications of its employees can provide a safe way to approach the discussion of who should receive leading roles in the operation of the business.
Finding a way to gain the support of the family will not only make the planning process smoother, but also will increase the likelihood that the plan will ultimately be successful. Once a family member makes a mental commitment to finding a solution, he’ll be much less likely to stand in the way of arriving at that solution.
There are two problems that are so common in succession planning, all estate planners should be prepared for their inevitable occurrence: (1) reluctance to begin the planning process; and (2) family conflict.
This step may seem relatively straightforward, but it’s imperative that the client and family understand that implementation of the plan may be a multi-year process. Training a successor is a key responsibility of the founder, and it’s one that can greatly increase the probability of the business’s continued success.
This Gallery is adapted from the author's article in the March issue of Trusts & Estates. Subscribers can read the original it in its entirety here.
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