Succession Planning

At RLB, our specialty practice division primarily deals with issues pertaining to:

  1. Transfer of the family business
  2. Asset & creditor protection
  3. Improving the valuation of your business
  4. Will & succession planning

Asset & creditor protection as well as improving the valuation of your business are on-going processes that require attention during the lifetime of your business.

However the other functions are transitional and more customized to your personal objectives. They take a lot of time and prudent consideration. They not only have intangible attributes attached to them, they also may be directly affected by external uncontrollable influences including changing governmental and tax legislation that you and your advisors need to be aware of.

By planning early, say 5-7 years out, you are in a great position to minimize risk and maximize after-tax cash retention.

Below are some simple thoughts for consideration.

Getting started…….

  • If something happened to you today
  • who would run the business?
  • what income would you need?
  • Valuation-how much do you think the business is worth if sold to an:
  • outside buyer
  • family member
  • Do you have a Will, power of attorney and shareholders agreement?
  • Do you have a strategic plan?
  • Who are the stakeholders in your business?
  • family members
  • key employees

There are many things to consider when you are creating a succession plan.  There are different types of Succession Plans and things to consider for each type: 

Family Participation Plan…….

  • Criteria for family to enter the business
  • age
  • experience
  • education
  • compensation
  • Who will have voting control of the company and for what period?
  • Training and supervision, mentoring
  • Retirement
  • Marital issues, protection, transfer of ownership

Management buy-out…….

  • Qualifications of key employees
  • Do they get along with other stakeholders?
  • Are they present for the long-term?
  • Can they afford the purchase?
  • Are they insurable?
  • Do they have good leadership?
  • Are they free of baggage?

Improving the value of your business………

  • Focus on growth prior to the sale
  • Evaluate discretionary expenses
  • Assess company performance to others in the industry
  • Document business decisions and operational systems to make transition easier for the purchaser
  • Remove non-operating assets at least 2 years prior
  • Purification, deal with tax issues
  • Debt restructuring
  • Restructuring shareholdings to maximize after-tax cash flow from sale
  • Transition team in place

Talk to your RLB advisor on how to set up your Succession Plan.