TS Prosperity Group recently brought a deep-dive presentation detailing Business Succession Planning to Atlantic, Iowa. A small team traveled to engage with a room full of people at a Lunch and Learn hosted by the Atlantic Chamber. We took notes to give you a brief recap of the four common themes and important takeaways that our TS Prosperity Group employees discussed.
Meeting the Bare Minimum
When it comes to any type of a succession plan, a great place to start is by having a “best and worst-case” scenario in place. Sometimes people avoid thinking this way because of emotional issues that might be a result of diving into the weeds of succession/transition planning. However, the unexpected could happen to any of us at any time, and you’ll want to make sure that your business and those that you love are thought of and cared for.
It is important to be fluid in your planning, as life is constantly changing. You will want to keep revisiting the plans you have set in place to see what, if anything, you should update. It doesn’t pay to be short-sighted in these instances, so thinking through all possibilities and adjusting your plans along the way will positively serve your business and, eventually, your successors.
Fairness, Not Equality
When looking at business succession planning and how it should be divided up among heirs (assuming there is more than one), one of the major issues family face is “fairness.” Most 2nd and 3rd generations believe everything needs to be equal among all the heirs, but this is not always the best case scenario for the business or its successors to thrive. The concept of dividing a business between heirs can be an extremely cumbersome, emotional task and difficult to communicate within a family. However, this discussion needs to be open and honest so that everyone is on the same page, leaving no surprises down the road that could threaten the plan. A good rule of thumb: “It will be equitable, but it won’t always be equal.”
When planning, you should not just be thinking of the next generation, but the next two generations. Only 30 percent of family businesses survive and have a successful transition to the 2nd generation. Of the 70 percent that fail to make it to that 2nd generation, 60 percent failed due to lack of communication and an additional 25 percent failed due to lack of preparation from the current generation. Communication with future successors on your plans along with working with them to ensure they are prepared to be good stewards of what you have built and continue to grow upon it, are key factors in your planning. By the time most family businesses reach the 3rd and 4th generations, their survival rates are 12 percent and 3 percent respectively.
To hear more about what TS Prosperity Group can offer you in the realm of Business Succession Planning, or in other aspects of your Fiduciary Management, please click on the links below or call us at: 1-844-487-3115