IN REAL ESTATE, the most important consideration is location. In family businesses, it’s transition, especially when the goal is succession. It is inevitable that owners will leave their business one way or another. You can leave it with pride if you create a transition plan that makes sense for you and your successors. Or you can leave it in failure by not planning properly or at all. How you choose to leave it is entirely up to you.
1. The Ultimate Business Challenge. For most family business owners, determining the best exit strategy, transition opportunity, or succession plan is the ultimate business challenge. It is also the most important decision-making process that controlling owners must force themselves to do. I specifically use the word force because business transition is a grind that most owners would prefer to ignore. Unfortunately, many do avoid it, and the result often becomes decisions made by lawyers, accountants, and sometimes the government.
2. Why Must Plans Be Made? There are two key reasons why planning is critical. First, there is the financial aspect. Owners work hard to build a business over several decades, so realization of the financial reward for doing so is important. Logic tells us that plans must be made in order to ensure an owner’s security in retirement and ultimately minimize estate taxes. Owners have a number of business transition options, but maximizing the financial return on investment is a high priority. One question to ask is how you can get the most out of your business under the most favorable terms and conditions. Another is how much you really need if your goal is to transition your business to a son or daughter or close relative.
The second reason planning is critical is the personal impact of transitioning the business. As practical as it is to want to retire comfortably, concerns about leaving the business, who to leave it to, how that affects family relationships, and how it impacts you emotionally are all vital. Letting go of a business that you have spent a lifetime building — and into which you have invested a considerable amount of self-esteem — is often a very troubling experience, even if the goal is to leave the company to your son or daughter. And if closing down the business is the alternative you choose, the emotions surrounding such finality in a company that may have existed for generations are even more painful.
Planning for your business transition is not the end of your responsibilities as a business owner; it’s more like the beginning of the end. And it isn’t easy, unless you have something to look forward to, like travel, hobbies, relief from the daily grind, and a flexible schedule that should be the envy of almost any retirement-age person. If you need help thinking this process through, reach out to someone you trust who can provide thoughtful advice.
