A Brief Overview of Business Succession Planning

October 20,2019

As a business owner, you have put a lot into your company. Beyond the obvious financial investments and sacrifices you’ve made, you’ve poured your ideas, time, and energy into building your business to its current state. That’s why it’s so important to include business succession planning in your estate planning efforts.

Figure Out When You Want to Leave

Perhaps one of the most important questions to answer as a business owner is “When do I want to leave?” Maybe you want to work to retirement age, sign over full rights to the business, and spend your golden years completely free of any work responsibilities. Maybe you want to maintain ownership until you pass and include it as part of your estate. Perhaps you’d like to step down at an early age but still have a hand in running the business. No matter what you decide, you should spend some time considering your options.

How Involved Do You Want to Be?

Another part of business succession planning is figuring out how involved you want to be after you step down as owner. Some owners choose to completely leave the business after selling it or passing it on, but others choose to stay on in an advisory role to support the new owners and keep the business on the same path. Others combine the benefits of both options by temporarily serving in an advisory role during the transition and stepping down afterward.

Figuring Out Your Company’s Value

If you want to pass ownership of your business to a family member or loved one, you don’t have to worry about getting a fair price for it. However, if you plan on selling part or all of your business, proper business valuation is essential. Common methods of business evaluation include asset-based valuation, which combines the value of all of the assets owned by the business; competitive analysis, which compares your business to similar businesses in the area; and earnings multiplier, which is based on the annual earnings of the business. 

Planning for Your Transition

Your estate planning attorney can help you create a plan that honors how and when you want the transition to happen. You’ll decide which circumstances will trigger the handover or sale of the business. For example, you may choose to hand over the business if you become disabled or incapacitated, at a certain age, or upon your death. 

Make sure that your business continues to thrive and serve your community after your passing with a comprehensive succession plan. For more personalized advice, reach out to ElDeiry & ElDeiry, P.A. at (954) 670-2800.

Five Tips for Business Succession Planning

December 22, 2020

If you are a business owner, you undoubtedly have a lot of responsibilities on your plate. While it is easy to focus on your day to day responsibilities and growing your business, it is also important that you think about the future of your company. If something should happen to you and you are unable to keep working, you do not want the business to have to close down as this would not only impact you and your family, but also your employees, vendors, and others. This is why effective business succession planning should be in place for all established organizations. The following tips will help you to establish a good succession plan and keep it updated over the years.

Plan for All Your Responsibilities

Business owners truly put their blood, sweat, and tears into their company. They often do far more than just the traditional activities associated with running the business. When thinking about succession planning, it is important to consider all your responsibilities to ensure they are transitioned to someone else. In many cases, it is unreasonable to try to transition all the work you do to a single individual who will be taking over the business. Planning for how all your activities will be handled when you are gone is critical.

 Succession Plans for More than Just the Owner

For small businesses, a succession plan will often just mean deciding who will take over the ownership role of the company when you are no longer there. As a business grows, however, other roles become essential to the success of the business. Make sure you think about every position within your company that is critical for operations and have a succession plan in place so that you can avoid disruptions should that person leave the company.

Involve Your Successor

One of the biggest mistakes people make with succession plans is assuming that your successor will want the job. This is especially common with family run businesses, but can happen in any type of company. Do not assume that your child or someone you have been mentoring for years will want to take over the business. Instead, ask them if that is what they want and let them know that you want to help them grow into that role.

Keep Your Succession Plan Up to Date

Succession planning is not something that you can draft up once and then forget about. As your business changes, and as people come and go within your business, it will be important to modify the plan. A good rule of thumb is to review your succession plan with every major change that takes place with your business, or annually, whichever happens more often.

Streamline the Transition with Legal Preparation

Planning out who will take over your company is a great first step. In an ideal situation, you will be able to engage in a phased transition to the new head of your company so that there is no disruption to the business. If, however, you pass away or become incapacitated unexpectedly, the succession plan will need to be activated instantly, which can make it much more difficult. 

One of the biggest challenges for the new leadership will be transitioning the legal ownership and rights to the company so they can make important decisions. This is why having an attorney help draft up things like transfer of ownership, power of attorney, and other documents should be a part of your succession plan. Contact ElDeiry & ElDeiry, P.A. or call us at (954) 670-2800 to schedule a consultation and learn how we can help you with your business succession plan.