Preparing a Business Succession Plan
Regardless of what your plans are for the future of the business, sooner or later, you will transition it to someone else. Either to family members, key employees, or some combination of the two. The transition is inevitable.
At Pacific Portfolio, we help facilitate the conversation between multiple parties, such as your close advisers and/or consultants that would be part of the business succession planning engagement. One of our goals would be to make sure that all advisors involved are in sync with one another.
In an ideal scenario, you get to control and be an integral part of the process, but that is not always the case. An unexpected death of an owner, key executive, or employee can damage a business if no successor is found and there is no plan.
Every business succession has their own unique characteristics, and not all are cut from the same cloth. Some owners want to exit entirely, at a certain date. Others want to stay involved to a lesser extent over time but never truly exit. These issues, and others, must be examined. The plan should be designed to:
Address expected timing
Designate one or more successor(s)
Indicate the value of the business
Allow for execution of the plan
Discuss communication with employees, customers, and family
Incorporate tax planning.
A proficient way to manage the process from what we’ve seen is by devoting ~9-12 months to the cause. Take a few months discussing the procedure with your family, executive employees, your bank, and other key stakeholders.
Contact your financial adviser, lawyer, and accountant, so they can get involved from the onset. Build and improve the plan over the next few months and put it into action over the last three or four months.
From our experience, we’ve found it critical to establish relationships with advisors ahead of the event. Therefore, we take the time to deeply understand our clients and their business, so that we establish long lasting mutual relationships with them from the onset.
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