If you're going to successfully combine family and business, you need
to have a succession plan in place - sooner rather than later.
A succession plan contains two
main parts: 1) your plan for transferring control, or management of the
business, and 2) your plan for transferring the assets of the business.
Part of it is art. Part of it is science. But as a start, it requires an
acknowledgment that if you want the business to continue forever (who views
their business as having a life expectancy?), you have to plan for the day when
you are no longer there.
Management succession takes
much planning and effort, but at the end of all the planning, it must be
implemented. The NextGen leader must be mentored, encouraged to interact with
peers from similar companies, challenged often and given
additional authority over time. His first major decision can't come
on the day after your retirement party or funeral. This is the "art"
part of succession. Now to transferring the assets (yep, you guessed it...this
is mostly a science, though it can be artfully crafted).
When the time comes for you to
no longer own your company, you either close the doors, sell to outsiders or
sell to insiders. Assuming that your wish is to keep the business in the
family, you should have a robust estate plan.
Since the family-owned business
is often the most valuable asset the owner has in his or her estate, many
factors must be considered in order to achieve the desired transfer and to do
it in the most tax-efficient manner.
What is the company worth? Can I gradually transfer part of it to my
children who are involved in the business? How do I fairly treat my other
children who aren't in the business? How do I get my value out of the business
so I can retire? How can my children afford to buy the business from me in the
future since it increases in value every year? The list of questions goes on
Watch the next edition for the
continuation of this article. Reprinted from GreensheetBIZ, the twice-monthly
newsletter for senior industry executives in the graphic arts, printing,
publishing and converting industries. Subscribe today at
William F. Woods, Jr., the author of this article, is an attorney-at-law and a
GreensheetBIZ associate editor.