Patching holes in business succession plans
For many owners, business succession planning is comprised of creating a buy-sell agreement early in the company’s existence and filing it away. Unfortunately, on their own, buy-sell agreements are generally too simplistic to handle the complexities of exiting a business in style (i.e., selling the business when you want, for the amount you want, and to whom you want). Nonetheless, most business owners use buy-sell agreements as their sole business-succession plan.
Weak business succession plans are like quicksand: Though they look like they provide reliable footing for a smooth exit, they often end up sinking the owner’s company when it is time to exit, whether voluntarily or involuntarily. As a business owner, how can you exit your business on your own terms, and avoid falling into the false comfort of an inadequate succession plan?
The seven most common holes are as follows:
1. Business-succession plans overlook challenges to the business.
2. Neglecting the decedent’s family.
3. Buy-sells that are too simplistic.
4. Ignoring common lifetime exits.
5. Using cookie-cutter valuation formulas.
6. Outdated buy-sells.
7. Poorly implemented buy-sells.
Addressing and patching these succession holes will help you, your family, and your company adjust and adapt
to both planned and unplanned business exits, making it more likely for you to exit your business in style.