Business Succession Planning - Part 2
A key aspect of a successful business and a well thought out business succession plan is a compatible advisory team. This is a group of trusted professional advisors who understand you and your business. Typically, the advisory team consists of four categories.
First is the board of directors in a corporation, partners in a partnership or mentor in a sole proprietorship. These people provide ongoing advice to you and the business. They will have areas of expertise that compliment your own skill set. They will not always agree with you.
They bring a different view point and, perhaps a more objective view of decisions that are part of your succession plan. In most cases, they will have been involved with you and your business for a significant period of time.
Second is an accounting advisor. If part of the plan is to sell to an outside third party, your accountant can review your financial statements and determine what needs to be improved upon in order to present the best possible financial picture to a prospective buyer.
If the succession plan is going to be internal, involving other current owners, family members or employees, the accountant can help educate them to the financial side of the business.
Any business succession plan is going to be impacted by taxes. You want to know the tax consequences of the business transfer. You want to be aware of different sale structures and how they impact taxes.
Third is an investment advisor, insurance broker and/or financial planner. These individuals will assist you with advice on investing the proceeds of any sale. They can also look at alternative insurance products that are available to shift risk and to provide financial resources in the event of your untimely death or disability.
Finally, any business involves legal aspects that need to be addressed beginning with business organization documents and continuing through the sale or transition document that transfers your business to the next owner.
Any new owner will want to see your business entity documents and essential contract documents, such as employment agreements, buy/sell agreements, supplier agreements and leases.
Each of your advisors brings a different perspective to the many different aspects that make up your succession plan. The varying viewpoints are valuable and will ultimately produce a more comprehensive plan that addresses all of the many components of a successful plan.