Setting Up For Success – Succession Planning and Your Business Part 3
This article is the 3rd in our series of myths related to business succession planning. In this installment we address the myth that “It’s always best to keep the business in the family”. While many business owners see this as their preferred path, there are many reasons why it may not be an option. Perhaps nobody in the family is interested in taking it on or you don’t have faith in the next generation’s ability to get along or to manage the business. In these instances it may be best to look for an outside buyer.
Every business is different and it’s beyond the scope of this article to discuss every specific situation. However there are several key questions to ask yourself. Is the value of your business tied directly to you being there to run it? Are you the one with all the knowledge and customer contacts? Would the business die if you did? If the answers to these questions are yes you may not get fair market value. It would behoove you to develop some management depth or perhaps you would need to stay on for a while after the sale to be able to get maximum value while the business goes through the transition process.
So who are your potential buyers? They could include someone who is in the same industry outside your geographic area that may be looking to expand into the area. It’s also possible that there could be a local competitor who may be looking to grow locally and could benefit from having one less competitor. Or an entrepreneur who sees your business as an industry he or she would like to get into. If none of these buyers are available or they are unwilling to pay full market value another option could be to bring in a key employee to teach them the business over a period of time with formalized plans put in place including a buy-sell agreement with a non-compete clause to facilitate a buyout at a future date. You will want to make sure that the buy-sell agreement is funded with life insurance to ensure there are funds available to execute the buyout in the event of the untimely death of the owner.
In any event selling a business is a complex process with many factors to consider including what’s the most tax efficient way to transition the business and what is best for the owner and the family. You should always consult with a team of professionals including your accountant, attorney, a business broker and someone who has experience in succession planning to help you with these difficult decisions. At Sgroi Financial we can bring the necessary resources to the table to navigate the process.
Schedule your first meeting right now:
If you don’t wish to schedule a meeting online, you can contact us directly via phone or fill out the contact form below. We look forward to working with you.
ABOUT SGROI FINANCIAL
Sgroi Financial is a full service, independent financial planning firm proudly serving the Western New York area since 1971. We offer services that will help you achieve your financial goals including retirement planning, investment management, estate planning, college planning and insurance. We help individuals, families, retirees, working adults, young adults and business owners.
Check out the background of our investment professionals on: BrokerCheck
Securities offered through Cadaret, Grant & Co., Inc., member FINRA/SIPC. Advisory services offered through Sgroi Wealth Advisory Group LLC, an SEC Registered Investment Advisor. Sgroi Wealth Advisory Group LLC, Sgroi Financial LLC, and Cadaret, Grant & Co., Inc. are separate entities. The information being presented herein does not consider your particular investment objectives or financial situation and does not make personalized recommendations. This information should not be construed as an offer to sell or a solicitation of an offer to buy any security. This material is not intended to replace the advice of a qualified tax adviser or legal counsel. Individuals should contact their own tax professionals and attorneys to help answer questions about specific situations or needs prior to taking any action based on this information. We believe the information provided is reliable, but do not guarantee its accuracy, timeliness, or completeness.
Due to various state regulations and registration requirements concerning the dissemination of information regarding investment products and services, we are currently required to limit access of the following pages to individuals residing in states where we are currently registered.
Financial Professionals associated with this site are registered to conduct securities business and licensed to conduct insurance business in certain states. Response to, or contact with, residents of other states will be made only upon compliance with applicable licensing and registration requirements. The information in this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase brokerage services to persons outside of the United States.