Why Family Businesses Should Have Succession Plans

The family drama surrounding an aging media mogul — and his unresolved succession plans — are at the center of a hit television show.

For family businesses, succession plans are designed to ensure the orderly transfer of ownership and leadership to the next generation. Relationships among family members are sometimes just as complicated in real life as they are on TV, and monetizing a closely held business to help fund retirement often takes longer than expected.69% of business owners plan to transfer leadership to the next generation. 39% expect to transfer it within the next 5 years

In fact, only 18% of family businesses have a documented and communicated succession plan in place.1 Much like the fictional billionaire in “Succession,” some leaders avoid the issue because they love running their businesses and don’t want to stop any time soon.

But one never knows what the future has in store. Even if you are happy, healthy, and determined to stay involved in your business for years to come, you might be glad you took the time to develop a thoughtful succession plan.

Set a Target

It might be wise to have a realistic retirement date in mind. Any effort to identify and groom a successor might take longer than you expect. And if you plan to sell your company, it could take several years to find a qualified buyer, begin the ownership transition, and finalize the transaction. To get the best possible price and terms, you may need to focus on improving the company’s balance sheet before you put it on the market.

Stage Your Exit

Keeping your business in the family may be an easy decision if an adult child or another relative is capable, willing, and prepared to take over. If so, finding ways to reduce the value of the business on paper could help you gift ownership shares with fewer tax consequences.

Otherwise, it may be possible to sell your business to co-owners, outsiders, or even your own employees. Closing and liquidating the assets could be the only viable option for some businesses.

Invest for Retirement

Making annual retirement plan contributions with some of your profits can build wealth outside of your business and help insulate your personal financial picture from risks associated with your business’s distinct market. Building a separate investment portfolio might also provide greater flexibility during and after a transfer of ownership.

All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful.

Contact Information:

Baystate Financial

501 Wampanoag Trail Ste 200
Riverside , RI 02915



Darrien Slaughter is a Registered Representative of and offering securities products & services through MML Investors Services, LLC. (Member SIPC  https://www.sipc.org/ )

Baystate Financial's main branch address is 200 Clarendon Street, 19th Floor, Boston MA 02116. (617)585-4500.


Neither MML Investors Services, LLC nor its agents provide tax, legal or accounting advice. Please consult your own professionals for tax, legal and accounting advice.

CRN202109-252796

 

Online Privacy Policy | Legal Notices

Check the background of this financial professional on FINRA's BrokerCheck
Check the background of this financial professional on FINRA's BrokerCheck