To say the future is uncertain for many Rhode Island businesses is an understatement.
But a formal written succession plan can pave the way forward and provide a smooth transfer of leadership when you leave your company and continue your legacy for generations.
Don’t have one? Unexpected life events can happen anytime. So start now . . . and review your plan often. Consider these tips to build a sound plan:
1. Be ready to sell when the time is right.
- indicators are most favorable and allow for a premium sales price.
- tax rates are favorable.
- you’ve suffered an illness or no longer enjoy running your business.
- you realize your heirs can’t fulfill expectations to run the business.
- you want to diversify investments in the business.
- you want to pursue other interests.
2. Include key elements. Although every succession plan is different, all include: – an exit strategy and smooth transfer of leadership developed in advance of your departure. Only 30 percent of business owners have a written exit plan in place. But a business exit planning advisor can coordinate efforts with your trusted advisors and develop a written plan that meets your goals.
- realistic valuations by an expert specializing in your business.
- the amount you need from the sale of the business, after fees and taxes, to provide for you and your family.
- strong management that can guide the business into the future. Potential buyers are likely to value it more if it looks like it can survive without you.
- enough time for proper planning. Without it, you may not realize the full potential from the business you’ve built.
3. Explore estate planning strategies. See your legal or financial adviser to learn how transferring business ownership from one generation to the next can reduce wealth and income taxes at the time of the sale.
- involve your team, board of directors, an investment banker and a business exit planning advisor. They can serve as a sounding board for strategic decisions and help you assess options, analyze risks and implement the transition process.
Looking ahead, uncertainty remains on the horizon. With these tips, you can set up a solid succession plan that can ensure the longevity of your business. For years to come.
Free Offer: If you want a preliminary assessment of your preparedness level for exiting your business, email me at TThrockmorton@websterbank.com for a no-obligation questionnaire which can assist you in the first step of developing a business succession plan.
The opinions and views in this article are those of the author and are not intended to provide specific advice or recommendations for any individual. All loans are subject to the normal credit approval process.
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