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As Seen in Multi-Unit Franchisee - True Business Success Requires Liquidity

As Seen in Multi-Unit Franchisee - True Business Success Requires Liquidity

Everyone feels the liquidity pinch some time or another. Growth, acquisitions, internal investments, taxes, and bonuses take capital and drain liquidity. With all of these needs using up your cash, it can be hard to set some aside for a rainy day, but that's just what you should be doing to ensure the future success of your business, says Champ Rawls.

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Case Study – 50/50 Partnerships Impact Business Decisions

Industry: Franchise

Company Overview: First generation, multi-unit and multi-brand business across several state lines

Challenge: 50/50 first generation business owners. One partner actively involved in the day to day operations, while the other has become less active, yet very much involved in overall business decisions.

Second generation family members and a few “friends of the family” are becoming interested in the business. The partners have different opinions about the strategic direction of the business, compensation plans based upon their contributions, and the appropriate way to integrate and develop family member employees in the business. Partner conflict is impacting teamwork and performance.

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Estate Taxation – Why Should I Be Concerned? By Denise Ware

The inflation-adjusted 2016 estate and gift tax exemption limits are set at $5.45 million per individual or $10.9 million per couple. This means that if you are a single business owner, you can leave up to $5.45 million to heirs and pay no federal estate or gift tax. Likewise, if you are married you can leave up to $10.9 million to heirs with no federal or estate gift tax penalty.

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Planning for the Predictable, Probable, and Possible

Former Secretary of Defense Donald Rumsfeld was widely ridiculed for his “what we do not know” response during a 2002 Department of Defense news briefing.

In part, Rumsfeld said about threat assessments, ‘As we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns - the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.'

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Transfer Stock: Gift or Sale

Recently a business owner approached me with the following: I am considering transferring some company stock to my son and possibly some talented managers. He stated, each person has made significant contributions to the business and a few of them feel they have already earned the right to some of the stock via sweat equity. He asked, should I gift or sell the stock to them?

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When-ing and Then-ing: A Common Succession Planning Pitfall

I recently agreed to be the wingman for Dr. Merlot who was calling on a succession planning prospect, Victor. Doc described this gentleman as a 65-year-old, second-generation owner of 17 dealerships with a son and a daughter employed by the dealerships and another daughter who was not actively employed in the business. 

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How Financial Independence Can Impact Succession Goals

What is financial freedom? In the context of business succession, financial freedom means accumulating sufficient liquid resources independent of the business whereby the owner doesn’t have to rely on business profits to maintain their standard of living.  Why is attaining financial freedom so important for a business owner in a family business setting?

Developing wealth independent from the business is paramount to an effective business transition. Financial independence affords the owners freedom to transfer some managerial and leadership responsibilities to successors without fear of them burning the entire house down. In essence, you have the opportunity to see your successors in action and determine if and to what extent additional coaching and mentoring may need to take place.

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To Create or Not Create a Succession Plan – That is the Question

On a regular basis, I get to talk with other succession planners. One of the topics that comes up frequently is the mindset a lot of business owners have in regards to needing a “triggering event” to prompt succession planning. The unfortunate thing about a triggering event is that it is usually just that, unfortunate. 

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Planning Techniques

“Is there anything your father should have done that he didn't regarding his estate planning?" "Yes" said the son...

That question was posed by the father’s original dealership partner (now in his 80’s) to the son several years after the father’s death at a meeting in which I participated. The son, who is a highly successful auto dealer, was very emphatic in his response. “Dad was unwilling to do anything because he thought he would be losing control. We were lucky – the timing of his death was during good market conditions when our dealership products were hot and the real estate market allowed us to sell assets needed to pay the estate taxes. We could have lost everything!” 

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Tips for Approaching Succession Planning with Your Franchisor

A few years ago I encountered a franchisee who had successfully transferred more than $2 million of business value to his children by taking advantage of available minority discounts in conjunction with depressed goodwill and depressed real estate values — a brilliant estate planning move. The only problem was that he had not received permission from his franchisor as stipulated in the franchise agreement.

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Skip Generation Cross Purchase Agreement

A new client consisting of two 50/50 partners expressed a desire to develop a buy-sell agreement around life insurance policies that they had been sold prior to my engagement. This was an extraordinary business reflected by the unique synergy created by the 50/50 partnership. Each partner had brought unique skills sets to their business that had been affirmed by success beyond anyone’s imagination. The values involved were tens of millions. The planning initiative also involved the updating of estate document and the initiation of strategic gifting.

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Financial Affairs - Eliminate Surprise For Your Loved Ones

A few years ago, a new client who lost his wife prematurely came to me with a large box full of papers that included several pieces of financial information including a dozen or so old life insurance policies. He had no idea if the life insurance policies were in force or not. Needless to say, investigating the contents of this large box was quite time consuming. During one of the lowest points in his life, losing his wife of thirty years, this gentleman and his children were tasked with pulling the pieces of their financial puzzle together. 

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Personal Financial Planning and Succession - How Are They Related?

 Personal financial planning is fundamental to the succession planning process. This initiative involves using the fruits of your labor to build personal financial security independent of the business. Having a personal financial wealth development and management strategy will provide you with the freedom to consider all viable business exit strategies without being forced into one solely based on your personal financial needs.

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How Financial Independence Can Impact Succession and Growth Goals

We live in the greatest country in the world! As we prepare to celebrate Independence Day, I thought it would be an appropriate time to reflect upon how fortunate we are to be Americans. Each day when we wake up, we have the freedom to choose how we will invest our time, talents and treasure. Thanks to God and our fellow Americans who have gone before us and who have made the ultimate sacrifice to provide us this luxury, we have the ability to make choices each day.  Some of us choose to invest our time, talent and treasures pursuing the American Dream by working for others while some of us choose to build businesses to provide opportunities for others and in an effort to achieve financial freedom and independence. Achieving financial freedom and independence is a challenging endeavor that requires focus, commitment and discipline.

What is financial freedom? Financial freedom implies that one has enough income to maintain their standard of living and therefore has the ability to pursue other interests outside of employment.  Financial freedom in the context of business succession means accumulating enough liquid resources independent of the business whereby you are not financially dependent upon the business to maintain your standard of living.  As a business owner in a family business setting, why is attaining financial freedom so important?

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Why Employee Contracts Are So Important to the Succession Planning Process

Business Structuring is a critical factor of the interdependent Succession Matrix®. Business Structuring impacts the nine other factors of the Succession Matrix® and accordingly, those other nine factors positively or negatively impact Business Structuring. For more information on all ten factors, refer to the International Succession Planning Association website at www.ISPAssociation.org.  

Business Structuring actually consists of two sub-factors, Business Organization and Business Documentation. Business Organization refers to the actual structure of the business as a corporation, LLC, partnership, etc. and its alignment to the strategic goals the business has for the continuation of success through the next generation of owners and managers. Business Documentation, as the name implies, refers to the actual documentation that formalizes the business organization as well as agreements regarding the disposition of ownership, leases of equipment and real estate, and contracts with vendors (franchisers, distributors, lenders) and employees. With respect to employment contracts, I am often asked what role an employment contract has in business succession planning. In light of the volume of curiosity, let’s embrace this subject.

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Don't Overlook the Employment Contract - How It Can Impact Your Exit Strategy, Cash Flow and Protection from the IRS

As a dedicated business succession planner, I am often bringing up the subject of employment contracts. The predictable initial response is “I hate contracts and what role could an employment contract have in my business succession planning?” This question generally comes from someone who has 80% of his/her net worth tied up directly or indirectly in their business and does not have a prayer of retiring without concerns about their financial security. They are plagued with the concerns of “Where am I going to get income?” and “How will I replace my current benefit package?”  Fortunately, the employment contract can be a very valuable tool in relieving these concerns and facilitating business succession planning.

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Don't Overlook the Employment Contract - How It Can Lock In Your Competitive Edge

In addition to employment contracts being beneficial for business owners, they also can play a very important succession role with key managers. Business owners commonly have concerns that key managers, critical to the continuation of the business’ success, could be recruited away by a competitor. There is also concern that the key managers could become frustrated with their perception of the succession plan and jump ship after the owner’s retirement rather than give the successors a chance to earn respect.  And the nightmare of nightmares is that with access to customer lists, processes and technology, a key manager could hook up with a competitor and inflict devastating damage on the business. These concerns about the commitment of key managers commonly impede exit strategy, successor identification and preparation, the transfer of management responsibility and the transfer of stock.

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Feel Lost In the Game? Take A Half-Time Break and Re-Review Your Game Plan

In my previous two posts, I’ve discussed a couple of situations in which significant changes occurred that necessitated updates be made in the succession planning arena. Fundamentally, succession planning is a strategic planning process. Just as in your annual forecasting for your business, you have to review your plan on a regular basis to determine where you are relative to where you want to be, and make adjustments as necessary. 

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When Tax Laws Change, Estate Plans Need Review

I sat down with a long-term client earlier this week and was reminded once again of the importance of regularly reviewing your estate and succession planning. This client is the majority owner of a family owned company and has his children involved in leadership roles. He is in his second marriage to a woman who is not his children’s mother.

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US Debt Downgraded: What do I do now? By Dan Thill

On Friday, August 5, the United States’ debt was downgraded from the highest rating of AAA to AA+ by Standard & Poor’s (S&P). The downgrade was announced after the market closed on Friday. Stocks had already been under pressure and as a result of the downgrade and investors being overwhelmed by the numerous opinions of talking heads over the weekend, the following Monday experienced investors exiting the market en masse. Subsequently, equity markets came under heavy pressure and unease mounted about the strength of our economy.

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