Succession Planning. What’s the hurry?

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“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

You’ve built a great business. You’re in the prime of your life. You feel that you have enough time to begin worrying about succession planning. What’s the hurry?

As the good book says; tomorrow is promised to no man.

For years, my go to place to check out the latest music gear, or to repair my music gear, was Mandolin brothers on Staten Island NY where I live. Stan Jay, the beloved owner for 40 years, had a who’s who list of clients including; Paul McCartney, George Harrison, Bob Dylan, Joni Mitchell and others. There were usually close to a 1,000 beautiful instruments on display, just waiting for me to say hello and start strumming.

One day I walk in and the walls were bare. No guitars. No mandolins. Nothing. The children, Allison and Eric, two fantastic individuals, told me that their dad had suddenly died. Because there was no formal succession plan in place they were forced to liquidate. While the plan is to speak to new potential buyers and bring the store back to its glory days, it all could have been avoided.

Many owners are so busy taking care of the day to day business, their not taking care of their own long term financial health. An effective strategy takes time to implement. Most professionals recommend a minimum of 10 years. I say, build your business on day one to sell it. It’s not a matter of “if” it will occur. It’s more like when it will occur.

Think about it this way. If the goal one day is to transfer the ownership to your children, or key employees, training is necessary. Mentoring, and preparing your successor(s) takes time. This can’t happen successfully 6 months before you want to sell.

If the goal is to sell to a third party, then you better have your business  look not only shiny from the outside, it must look shiny from the inside with accurate financial records, projections, and supporting documentation.

And then there’s the need to have in place your succession planning team to help you implement. As a financial planner, I stand in awe with the share number of moving parts involved when a business owner embarks on this task. Succession planning requires more than one professional to get the job done right. It requires an interdisciplinary team all being coordinated by a single professional on your behalf. Here’s a break down of the team.

Interdisciplinary team

 

Financial Planner- It doesn’t make much sense to begin succession planning, before you know what your own personal income needs will be to maintain your quality of life. Financial planning is about organizing key aspects of your financial life, understanding what’s aligned or not aligned with your personal values, all necessary to implement sound financial decisions.

As a financial planner admittedly I’m a bit bias when I say that it is the financial planner who should be coordinating all the other members of your team. The right financial planner should be your quarterback organizing all the data so the financial plan is updated properly

Accountant- Accurate financial statements are key. An experienced accountant will not only provide the usual accounting and taxation work, they can also assist in a non-formal business valuation, and operational consulting to help identify the strengths and weaknesses of the business.

Valuations Expert-If there is a risk of having the valuation contested,  a formal business valuation expert is key. Litigation support, economic damages, and expert witness services is a a highly specialized field. For example if you believe a family member or key manager will disagree with the valuation, it’s strongly recommended you hire the right person  valuation and litigation support.

Attorney- Business succession planning attorneys provide the tools to implement the succession plan. Because the selling of a business integrates both business and personal components, the succession planning attorney must be proficient in a variety of skill sets including: manager buyouts, family gifting, generational transfers, family estate planning, tax and qualified and non-qualified retirement strategies.

Sell Side Advisor- Selling a business is complex. Taking on all of the responsibility of selling what could be the most important asset you have, may not be in your best interest. In the end, you are the client, and you will determine whether an offer is acceptable to you.

Psychologist-  Passing the baton can be influenced by emotions as much as it is influenced by logic.  Business owners often have their identity wrapped up with the business, and like Neil Sedaka sings, “Breaking up is hard to do.”  Being able to continue your sense of purpose and redefining your life, where your business is no longer at the center, may require counseling.

So what are you waiting for? Find yourself the right financial planner, and get started today. You’ll be glad you did.

BH Wealth is prepared to help coordinate all your succession planning needs, powered by MoneyCapsules®.

To learn more about our artful way to talk about money, visit our home page bhwealth.com and download our free eBook, The Sound of Money.

 

Succession Planning Video Interview for Music Retailers

 

 

Written by Jaimie Blackman

Jaimie Blackman

Jaimie Blackman has created Sound Financial Decisions ™ powered by MoneyCapsules®, to help guide business owners through the complexities of succession planning.

Jaimie writes “Smart Succession”, a monthly column in Music Inc., and also writes a bimonthly column for Canadian Music Trades magazine. He has spoken at NAMM U Idea Center, and at Yamah’s Succession Advantage.

As a financial literacy educator he has taught at New York University and has lectured at the 92nd Street Y, Marymount Manhattan College, and CUNY.

As President of BH Wealth Management, Jaimie also helps his clients implement investment and insurance solutions which are aligned to their personal values. Visit bhwealth.com to learn more.

To subscribe to Jaimie’s Succession Success: Insights for Music Retailers, visit moneycapsules.com.

The purpose of this post is to educate. Our content should not be construed as advice. If legal, tax or other advice is required by the readers, professional advice should be sought.

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