If business is in your blood, you’re not alone—90 percent of U.S. businesses are family-owned and one-third of the Fortune 500 is either family-owned or family-controlled. You probably dream of seeing its success continue into the next generation, but statistics show only 30 percent of family-run companies today succeed into the second generation.
Don’t let your company become a statistic—put a succession plan in place. Successful transition is two-pronged: transfer of control and transfer of assets. It’s a complex process, but with proper planning, you can succeed. Busey shares five steps to get you started:
1) Plan early. Plan for succession 5 to 15 years before the projected event. This allows time for the plan to evolve, and for your vision of the succession to take place.
2) Communicate the Plan. Talk to your family about your plan and how you envision it moving forward. It’s important for your family to understand your goals and for you to understand their feelings and expectations.
3) Know your value. Accurate knowledge of value is key. Overvaluing can impact salability and financial interests, and an artificially low valuation can have negative tax implications—including estate taxes.
4) Ask for help. Having the appropriate experts on your team will inject an objective opinion into a potentially fraught situation and reduce the chances for key items to be overlooked.
5) What if the successor isn’t clear? Determine your successor, or identify if the best outlook is selling the business as soon as possible. Give yourself time to examine strengths and weaknesses of all potential successors to come to the best decision.
6) Estate planning is a huge, often daunting aspect of succession for business owners. The first step is determining the value of your business. At that point, you can begin deciding the best way to reduce the equity senior family members hold in the business with a goal of reducing estate taxes. Beyond estate planning, you’ll want to address other succession issues including:
Preparing or revising existing shareholder agreements
Transfers to spouses, members of the next generation or key employees
Formula used to value stock for redemption or sales
Life insurance and the funding of stock purchases
Using installment sale techniques to reduce the cash required at the death of a shareholder
Busey Wealth Management can help your family and your business stay together and continue to be successful for years to come. Call 1.800.67Busey or stop by one of our many convenient locations today.