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Succession Planning

succession-planning

Real Life Story

Bob and Jesse (their names have been changed to maintain privacy) are brothers and co-owners of a manufacturing company. They are approaching retirement and want to keep the business in the family. Yet they're discovering that making the transition is not so easy. Bob and Jesse can't agree on when to retire, and they're not sure which of their children should take over the business , if any.

It seems two children don't want to work in the business at all. Two others are only slightly interested and don't have great aptitude (although one of their wives is very interested and capable). Another of the children works in management firm, while one is in a senior management elsewhere. How can they all receive a fair portion of the business without causing resentment?

The one thing Bob and Jesse do agree on is that they needed professional help to resolve their succession planning issues, and so they turned to The Mustard Seed Group for professional consultation.

Why succession plans are important 

A succession plan outlines the way a business should be managed after the retirement of the current owners. It prepares the next generation of owners to carry on management effectively without conflict. Succession planning can keep the family's financial interests in a business, and by implementing tax-effective strategies, can greatly reduce the estate taxes that must be paid in the future.

It's never too soon to consider a succession plan. We advise that as soon as a company begins to have value, it's time to think about passing on that value.

Difficulties of succession planning 

By their nature, entrepreneurs are hard workers who prefer to do things for themselves. Usually, they are so busy with the daily management and operation of their company, they postpone succession planning.

The reasons can be varied. They may not relish the thought of no longer running the business they worked so hard to establish. They may be reluctant to give up their business, since it may signal their own aging or infirmity. There may be strong emotional attachments to their business, or to the idea of giving it to a favorite family member, regardless of ability. If there is no family member suited to taking over the company, the owner could be reluctant to discuss this, for fear of causing pain.

The end result is succession planning is left until it's too late.

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