Canby Financial Advisors - Succession Planning

Canby Financial Advisors helps business owners to identify whether it makes sense to put a succession plan in place, and can guide the owners through the implementation process.

Why should business owners plan for succession?
Potential solutions
Develop your plan

Why Should Business Owners Plan for Succession?

70 percent of family-owned businesses do not make it to the second generation, and only 13 percent continue to the third generation
Business partners rarely have the same personal goals and their time frames for retirement could be vastly different

In order to maximize the value of your business and assure a smooth transition for your clients, partners, and employees, you need to spend the time to develop a well-designed succession plan.

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Potential Solutions

Depending on your situation and goals, your succession plan may take one of many potential paths. Common approaches include:

Buy-sell agreement between partners to spell out how a business survives the departure of one or more partners
Employee stock ownership plan to transfer management and ownership of the business to a younger group of employees
Family Limited Partnership to pass ownership to the next generation of a family on a tax-favored basis
Grantor Retained Annuity Trust to retain an income stream from the business and transfer ownership to another group
Offer the company for sale in order to identify a buyer and earn a lump sum payout for your business

Each of these options has pros and cons for you as the current owner and should be evaluated to determine the best fit for your situation.

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Develop your Plan

Developing a succession plan can be a difficult process. Perhaps the most important step is gaining the commitment of all the owners to put a succession plan in place. The process includes:

Thorough analysis of your business' current financial position
An in-depth review of the personal goals of all of the owners
Determine the proper valuation method for the business—multiple of revenue or net profits?
Identify potential buyers of your company or companies
Evaluate merging with another business
Put in place proper legal agreements to govern your plan