What’s Your Business Plan?

Business succession planningEssentials of a Business Succession Plan

Small business owners will devote much of their time to growing their businesses, but frequently they forget to think about what will happen to the business if they retire, become incapacitated or die. That's why it's critical to have a business succession plan.

Interestingly, business.com's recent post, "The Show Must Go On: The Importance of Business Succession Planning," explains that there are some key underlying factors that determine whether a business succession plan is necessary. In some instances, it's easiest just to sell the business entirely, but other times there are partners who may want the business to continue operating after the founder is no longer involved. After determining if the business has the potential for long-term viability, an owner should have a succession plan that includes selecting a successor and getting the business appraised.

Selecting a Successor

Sometimes a small business owner will select a family member to assume the leadership role. However, you may not know if that person has the skills or experience to make a go of it and ensure that the business will continue to grow. You can't assume your children will want to continue the family business, and there actually may be other business partners or key employees who are better suited to take over. In any event, it's important to select and train your successors in all phases of the business. Then the business owner needs to be able to step aside and let the successors start to make the transition.

The Valuation of the Business

There are three ways to determine the value of a business. Let's look at each one. In the Asset Approach, the value of a business is determined by examining the stated assets and deducting the liabilities. However, this look focuses mainly on the balance sheet and doesn't consider important elements such as market conditions or good will. The Income Approach analyzes business income, requiring a review of past earnings, projecting future earnings and factoring future cash flow and capitalization to arrive at the present or future value of the business. Finally, the Market Approach, which is basically a comprehensive analysis of comparable companies that have been sold in the same industry, accounts for differences in the size, duration, and market risk of the business. An objective evaluation of present or future value of a business requires the services of a business valuation expert such as a CPA with business valuation credentials.

Creating and implementing a well-thought-out succession plan helps business owners in several ways. If the value of the business is determined, there should be no need for valuation in the event of death, and the price for a partner's share can be agreed upon. Also, a succession plan, along with a comprehensive estate plan, can expedite the settlement of an estate if the owner dies.

A well-designed business succession plan provides the opportunity for the fair and equitable transition of the business. In order to do this, your team of advisors should include a CPA, a tax advisor, and an experienced estate planning attorney.

Reference: business.com (January 21, 2016) "The Show Must Go On: The Importance of Business Succession Planning"


Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment


We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.