As a business owner, many of your advisors may be offering succession planning services. Bankers, insurance agents, CPAs and attorneys are all promoting succession expertise within their menu of services. As a result, more and more business owners are approaching their CPA, insurance agent, investment banker or lending agent as if they are the Wal-Mart of financial and business advice. This corporate one-stop shop approach has investment bankers selling insurance, insurance specialists offering investment products, CPAs reviewing estate plans and attorneys recommending financial strategies.  As unnatural as this may seem, professional advisors are becoming more versatile than ever before, which is not necessarily a bad thing. However, it is important to remember that while they are offering advice that could leave you better off than you were before, it may still leave you short of your full potential.  

In a very general sense, it’s likely you would hear the following succession advice from professionals whose core practice isn’t succession planning: 

  • Banker – “You need assets in a separate account away from your business for retirement.”  
  • Insurance specialist – “You need life insurance to offset the impact of estate taxes and other estate settlement costs.” 
  • Accountant – “You need to carefully consider the tax ramifications of your current business structure and any proposed gifting or sale strategy.”
  • Attorney – “You need proper trusts in place to avoid probate and unnecessary risk exposure.” 

None of these statements are bad advice. Each one deals with an important piece of the succession puzzle.  However, it’s counterproductive to begin these actions until you have addressed the most critical aspect of the plan – YOU!!! 

Identifying where you are versus where you want to go is the first step in the process of creating a succession plan. Your motivation and perspective will determine what course of action needs to be taken by you and your advisors.  Additionally, the actions of each professional will affect the others and it is highly likely that your plan will be disjointed without group communication. Unfortunately, the responsibility of uniting professionals to work together for your common cause falls on you. 

Your end goals impact the direction and needs of your plan. So planning without considering your end goals can cost you time and money.  To ensure planning actions are in-line with your goals consider the following questions: 

  • Who do you want to take over the business? Son? Daughter? Both? Key Manager? Third Party?  
  • Do you want to gift it or sell it to them? Are they ready?  How do you train them? What if they tank the business? 
  • How do you take care of inactive children? Is your plan going to disrupt family harmony?  
  • What are you going to do with all of your free time in retirement? 
  • How will the lives of your business family be impacted by your decision? 
  • How do you reward your managers for years of loyal service? 

These are just a few of the questions to consider before making long-term planning decisions impacting everything you have spent your life creating. YOU are the owner, and everyone else should be functioning in a role that reflects your agenda, not theirs.  The development of your agenda will be the most difficult, time-consuming and emotionally draining step in the process.  It requires you to address issues that you’d just as soon ignore forever and hope don’t come to the surface.  Pretending emotional issues don’t have a role in your planning predictably leads to succession failure.  Succession Success, however, is very attainable if we begin with one simple fact – You care!

Once you’ve established your goals for the process, the next step is to find someone who will ask you the right questions, represent you in coordinating planning efforts among professionals, and help steer your planning ship in the direction you want. But you’ll need to look hard because this type of professional cannot be found at Wal-Mart… 

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