How important is it to review the plan and make any necessary changes?
It is extremely important to review the plan as often as there are changes within the business, with owners, within the industry, or with the applicable rules and regulations. Tax law changes may also affect the plan. Change is inevitable so owners must always make sure they are prepared and all plans for the business are current. This should also include the owner’s personal financial, trust, investment and estate plans.
How should a business owner communicate the succession plan to employees and prepare them for the owner’s exit?
The best way to communicate to employees is by delegating responsibility and establishing the go-to people. When you start transitioning, you must relinquish some authority. The employees will see how the transfer influences the key personnel and then the conversation becomes easier. You cannot make everyone happy in the choices you make to replace yourself or the changes in key management, but you can keep their loyalty with constant communication of changes ahead.
How can a business owner maximize the value of the business in preparation of a sale or transfer?
There are several ways to increase the value of a business. Among other things, the business may want to ensure its books and records are in order, lock in key employees who might otherwise leave, reduce expenses and strengthen the management team so that they can run the business without the owner.
How important is it to have a financial adviser involved in the process?
I believe financial advisers play a crucial role in developing and implementing a successful exit strategy. Without the help of experienced advisers, an owner may miss opportunities to maximize the company’s value or run into tax problems or other issues.
Here at Wells Fargo, we have groups that specialize in helping business owners with their financial and business succession planning. They work with the business owner to define goals, evaluate different options and implement the strategy the owner chooses.
What would you say to a business owner who is reluctant to address succession planning?
Now is the time! At the very least, every business owner has the responsibility to address the contingencies of his or her disability or death. However, the right planning can also put more money in the business owner’s pocket if the owner sells while alive. Ultimately, having an exit strategy demonstrates the business owner is in control and focused on an organized and profitable transition.
Kim Milder is a vice president and senior relationship manager with Wells Fargo Bank. Reach her at [email protected] or (281) 587-3037.
