By: Donna Greene, CFP®
Business owners often invest their lives into their business—but neglect the critical final step of ensuring the successful transition of the business to its future owners. With our intimate knowledge of your financial objectives, Busey Wealth Management can assist in navigating this process. As an advocate on behalf of our clients' interests, we utilize our expertise to coordinate efforts between qualified legal, tax, insurance and investment advisors.
We often consult with business owners to simplify succession planning, and work to develop transition plans and customized wealth management strategies for their families. To ensure we are meeting all of our clients’ needs, we periodically partner with outside experts who may bring a unique perspective. I asked Bethany Hearn, CPF/ABV/CFF, ASA from CliftonLarsonAllen LLP to share some of the lessons she has learned while adding value for our clients:
“It is far too common that closely held business owners do not know the true worth of their largest asset—their business—and either significantly overvalue or undervalue it. Approaching retirement with an artificially low valuation may result in negative tax consequences—including in estate taxes. Taking time to plan and implement a strategy can greatly reduce tax impact on business owners and their heirs, while failing to plan for needed liquidity can result in the company being sold or heavily leveraged to fund the estate tax bill.”
Two parts of any business succession help lead to a successful transition: the transfer of control and transfer of assets. “Attending to one part and neglecting the other puts the long-term success of the business and family relationships in peril,” says Bethany. “According to the Family Business Institute, only 30% of family businesses make it to the second generation, 12% are viable into the third generation, and only about 3% of family businesses operate into the fourth generation and beyond.”
As with every other aspect of business, the first step is to develop a plan of action. There will be tough decisions, but if these decisions are recognized and addressed, conflict can be averted and effective control of the company can move into new hands. Bethany suggests starting early. “At least ten years in advance is recommended. Some entrepreneurs might even startup the business with an exit strategy already in place. Generally, the more time spent on planning, the fewer problems.”
At Busey Wealth Management, our objective is to utilize our expertise and partner with specialists to transition your business investment into retirement security and ensure your legacy for future generations. We invite you to contact Busey Wealth Management and capitalize on the opportunities you face in your industry.