Succession Starts Early

What are the biggest hurdles to a successful business transition?

Control and Time. We can usually account for economics, fairness, incentives, and similar concerns within a thoughtful transition plan. If the current management, however, is unwilling to eventually give up the reins or the new management cannot effectively assume managerial responsibility, the business succession plan is doomed. Similarly, a successful transition plan is designed and implemented over a period of years. Allocating significant thought on the front-end and allowing for adjustments to the plan over time dramatically increases the chances of a successful business succession.

When should I start my business succession planning?

Start today. The first priority is contingency planning for a catastrophic event. For example, who can sign checks or make business decisions if the current management is suddenly unavailable? Once there is an immediate contingency plan, the focus can move towards a longer time horizon. 

What is a trust and why would I use one?

Simply put, a trust is a fiduciary relationship where one party hold property for the benefit of another. Trusts generally come in two flavors: “revocable” and “irrevocable.” A revocable trust is a substitute for a will that is designed to avoid a probate administration following your death. The revocable trust provides little current creditor protection and may be changed as often as you see fit. An irrevocable trust is fixed upon signature and is generally created for tax, creditor protection, or similar reasons. Revocable and irrevocable trusts can each play important roles in a thoughtful business succession plan.