- Created on Thursday, 22 August 2013 00:00
- Published Date
- Written by Rikki Winters
Good Morning. My name is Bob Hembd. I have 25 years of experience in the financial services industry. Throughout this time, I have worked with hundreds of business owners in helping them solve the problems that can arise from being self- employed. These issues include taxation, risk management and business succession planning.
The area I would like to discuss today centers around business succession or continuation planning. In an entrepreneur’s early days of establishing a successful business, the focus is on doing everything they can to manage cash flow and profitability. Even though it is important, the thoughts of planning for the “what- ifs” are generally not on the entrepreneur’s mind. In my opinion, this planning is even more important for the military family business owner.
So, what is a Business Succession Plan?
Really, it is a tool that lays out your process to providing a strategic and comprehensive approach to managing and anticipating the life of your business and its transition.
It can be considered a live road-map, which allows you to make changes. This plan serves as a guide to manage change in your business. The succession plan should always be coordinated with your estate plan.
Why do you NEED a Business Succession Plan?
80%-90% of businesses in the United States are family owned, and yet according to research (Family Firm Institute, 2005) only 3% make it past the third generation of family.
Organization and a succession plan are key components because they will prepare you as a business owner for the time you will retire, or in the case of unexpected circumstances that you have to sell your business. It allows you to address the issues of illness and death, and it allows you to secure the success of the business transitioning to a new owner. *Whether you are related to the person or whether it is being transitioned to another interested party.
Why should you include this with your overall estate plan? Because having a plan allows you to maximize your return and minimize the tax burden at transfer. All items listed are relative to your estate. Having the documents developed and organized will insure that your wishes are followed through.
Additionally, unexpected gift, estate and income tax will become an issue without a plan. Ultimately, the future of your business could be exposed.
To summarize a business succession plan, it will list the new owner(s), whether it is a family member, employees, a third party or a combination. It structures and explains an orderly exit for you from your business when the time comes.
Due to the uncertainty and constant change that comes with the military life style, the military spouse business owner needs to plan for all contingencies. These should include shorter lease agreements, thorough business partnership agreements and a buy-sell agreement. Addressing these issues will make certain that the business owner has provided themselves the most flexibility possible.
The shorter business lease will allow for the “store front” business to be re-located should that need arise. Having a partner in your business, though it may create other issues beyond the scope of this blog, would inherently allow for the sale of your business to a predetermined individual. Having a professionally drafted buy-sell agreement would allow you to sell the business at a predetermined price in any scenario; including death, disability, retirement or relocation.
I highly recommend that you contact a business advisor whom specializes in business succession planning, or check with the Military Spouse Business Association for any recommendations they have for people in this field.
If you have any questions in regards to personal and financial information organization, I would gladly speak with you. You may learn more about us at: www.mylegacymadeeasy.com. Our business is a military friendly organization that works to provide our services to people exactly like you!
Thank you for your time, and enjoy the balance of your day,
Bob Hembd, Founder
Bob Hembd is a twenty five year veteran of the financial services industry. Specializing in life insurance and safe money retirement planning, he has helped thousands of professionals and business owners create a personalized strategy that is best suited for their planning needs. More recently, he created the Legacy Planner, estate organizational tool, through his company MyLegacyMadeEasy, LLC. The philosophy behind the Legacy Planner is to "help people organize their life's work". It is offered on a wholesale basis through investment advisors and independent agents nationwide and is also offered FREE to military personnel and Veterans through the MyLegacyMadeEasy Foundation for Veterans.