Succession Planning
Family-Owned Businesses
Many times, the wealth of a business-owning family is committed to an illiquid, non-diversified asset (e.g. the business). However, they rely on this asset to maintain the family’s lifestyle, their eventual retirement, education funding and charitable giving. A successful multi-generational investment process requires advanced planning strategies, investment and risk management strategies.
Our Focus
We are focused on the Business Transition Planning Process. Our clients have worked hard to create the business wealth that they wish to live on for the balance of their lives. This is wealth that they would like to see pass on to children, grandchildren and beyond.
Multi-Generational Wealth Management
Understanding that a majority of family-owned businesses fail to survive the third generation, we work with our clients’ legal and tax advisors to help them custom design a preservation and transition process for these families. By coordinating the accumulation, preservation and eventual transition processes, we work to custom design and recommend a focused, balanced and disciplined strategy tailored for the benefit of each family.
Our Process
Step One: Setting Exit Objectives
1. Explain to the owner the need to quantify Exit Objectives.
2. Perform a financial-needs analysis to determine retirement income needs and wants.
3. Review and offer advice regarding personal investment strategies that are aligned with the Exit Plan.
Step Two: Determining Value/Price
1. Determine the current amount of the owner’s investment assets.
2. Determine the level of income needed (as well as the level of income wanted) after the owner’s exit.
3. Prepare a financial plan for the owner and his or her spouse.
4. Discuss the owner’s tolerance for investment risk pre- and post-exit.
Step Three: Preserving, Protecting, and Promoting Value
1. Discuss, design, and fund non-qualified employee benefits, such as deferred-compensation plans.
2. Discuss, design, and fund qualified retirement plans, such as defined benefit plans.
Step Four: Converting Business Value Cash: Sale to Outside Third Party
Determine whether the owner’s financial needs and other financially driven Exit Objectives can be met by expected net sale proceeds.
Step Five: Transferring the Business to Insiders: Children, Key Employees, or Co-Owners
Review the owner’s financial-independence exit goal in light of the proposed transfer-of-ownership design to ensure that the owner’s goal of financial independence is attained.
Step Six: Contingency Planning for the Business
1. Determine the amount of proceeds available to the owner’s surviving spouse if continuity plans are exercised.
2. Determine whether additional capital and income are needed: Will there be enough income for the family based on available assets and the owner’s financial-independence goal for the family?
Step Seven: Wealth Preservation Planning
1. Review the owner’s estate plan at the outset of the Exit Planning Process to ensure consistency with Exit Objectives.
2. Determine the amount of capital needed for the owner’s surviving family to ensure their financial independence.
Top 10 Questions for every business owner
1) How do you see your involvement in your business changing or evolving in the future?
6) Which method or methods have you used to assess the value of your business, and how confident are you in that process?
2) What’s your next great adventure after you leave your business?
7 ) Given your buyer (or successor) plans, have you thought about who the best leader for your business might be?
3) Which obstacles do you think could derail your business or personal goals in the coming years?
8) What do you think will happen to your customers, your vendors, your employees, and your competitors if something happens to you?
4) What role does your business need to play in helping you achieve financial freedom?
9) Which planning suggestions have other business advisors given you to prepare for the future ownership of your business?
5) What is your plan for your ownership interest in your business? Do you plan to pass ownership along or arrange for a sale some day?
10) What do you see as your greatest challenge when you think about planning for the future?
Still Have Questions?
Don’t hesitate to reach out to us anytime