DJC
T H E DA I LY J O U R N A L O F C O M M E R C E ,
MONDAY
October 24, 2011
www.djcOregon.com
P O R T L A N D, O R E G O N
Reprinted from the Daily Journal of Commerce.
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The three keys to successful business
succession planning
Ideally, plan needs to be in place three to five years before transition occurs
A
s baby boomers approach retirement age, the question
begs to be asked: What happens to the businesses they
own and operate? Studies suggest that as many as twothirds of all small and midsize businesses are owned by
boomers who plan to exit their companies within the next
decade. Yet fewer than one in five is prepared and has a written
succession or exit plan.While retirement typically is the impetus
for a business owner’s exit, other unforeseen events or
circumstances – such as an illness or an accident – could
precipitate a departure. In any instance, a business owner
generally wants to maximize the organization’s value, minimize
this tax burden and contain risk. Three important steps can
help accomplish that.
START EARLY
A succession plan ideally should be a part of a business plan. If
it’s not, then a plan should be in place no fewer than three to five
years before a planned exit from the business.
Begin by considering a series of questions about future needs
and desires, including:
• When do you want to exit?
• How much money will you need to exit?
• To whom do you want to transfer the business?
• How much is your business really worth today?
• Do you have a strategy to increase the value of your business
between now and your target exit date?
• Do you know how to structure a sale or transfer to a family
member or key employees to reap the greatest benefit?
• Do you have contingency plans to enable your business to
continue and provide for your family if you are unable to do so
yourself?
Once you know the answers to those questions – or at least to
most of them – you’re well on your way to making a successful exit.
However, if you’re having trouble coming up with the answers, you
could find yourself making a hasty exit without gaining the
maximum value from your years of dedication.
CONSULT AN ADVISER
The tried-and-true techniques that brought you business success
– such as learning from mistakes, developing a strategy based on
experience and simple trial and error – do not apply when
developing an exit strategy. You’ll sell or transfer your business only
once, so it’s important to make the most of the opportunity. That’s
why you should consider consulting an adviser who specializes in
business succession planning.
Advisers have the experience that others don’t; they draw on
what they have seen and learned while observing the failures and
successes of other business owners in similar situations. An
experienced adviser can help a business owner develop a plan that
makes the most of the transition and help avoid costly mistakes.
PUT IT IN WRITING
As with any other business plan or deal, a succession plan needs
to be put in writing to ensure that it is carried out as desired. The
plan should include specific recommendations for the sale or
transfer of the business, such as the desired buyer or receiver of the
business, as well as the desired structure of the transaction.
Ensure that your exit plan
includes a checklist that
provides a step-by-step plan of
action to assist with
implementation and
monitoring. To keep your plan
on course, the checklist should
detail each action that must be
taken, the individual or entity
responsible, and a due date for
the action item.
Owning and operating a
business requires a significant
investment of time and energy.
Protect the investment, and take
the necessary steps to optimize
your exit and leave the business
– and its continuation – on your
own terms.
Bill Manne
Bill Manne is a partner of Miller Nash LLP. His practice focuses on taxation, business and corporate law, and tax-exempt organizations, with an emphasis on emerging businesses and business-owner exit planning. Contact him at 503-205-2584 or at [email protected].