Feeling overwhelmed? You are not alone. The day-to-day demands on a small business owner can be overwhelming at times. This lack of time can lead to certain longer term decisions being pushed to the sidelines. Succession planning is one of those decisions.
Owners find it difficult to work ON their business if they are working IN their business.
Question: Who will take over the running of the business if the owner is disabled (either short or long term)? That is one single big question and a starting point to begin to think about succession planning.
Some reasons for not dealing with a plan for the succession of a business:
Lack of Time; Fear of mistake; Perceived difficulty of the process; Expense; Difficulty dealing with matters of fairness and equity; Spousal differences; Family dynamics; Hesitancy to share ‘private’ information- particularly sensitive financial information; and Problems with answering difficult questions posed by an attorney or financial adviser.
All of the above barriers to succession planning are very real to the business owner, but they are not insurmountable.
The best advice is…. to make a start – schedule a meeting with a qualified estate planning attorney who deals with small business succession planning. They can walk you through the planning process; answer your questions; and begin to build a plan for succession that will protect your business into the future.
One staggering statistic – “Only about 30 percent of family-owned businesses survive into the second generation, according to the Family Business Institute. Twelve percent are still viable into the third generation, and only about three percent of all family businesses operate into the fourth generation or beyond”*. This means that 70% of family owned businesses fail or are sold before the second generation can take over the business.
* “More than 8 out of 10 family businesses have no succession plans - Surveys show it is a primary concern, but owners struggle with difficult decisions” by Doug Bailey (February 9, 2016) The Boston Globe.
The health and longevity of a family business depends on having a strategic plan for the business and a plan for the succession.
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