Speakers: Maritess Bott & Unidentified Off-camera Speaker
[Music]Off-camera Speaker:
Hey Maritess, I would love to learn some more about business succession planning.
Maritess:
Absolutely! Hello everyone, I’m Maritess Bott. Thanks for watching or listening to our blog. Today’s topic is business succession planning. This is quite important for many business owners. Often, you start a business with great enthusiasm, wanting to see it grow and impact people’s lives—whatever product you’re producing or service you’re providing. But oftentimes, business owners—because I know, I am one of them—just get wrapped up in the business. You get so busy trying to make it grow, trying to make sure all the fires are out because there are always emergencies. I totally understand how busy a business owner can be, to the point that they don’t think about, “What would happen if I died? What happens to the business?” Especially if you’re a single business owner.
Or, if you have multiple business owners—maybe partners, three or four people—what will happen if one of them dies? What happens if one of them gets disabled, has a stroke, and is unable to make decisions anymore? What’s the best way to protect against those triggering events or unforeseeable situations? I always say, the sooner the better—the sooner the better to plan for these scenarios.
The value of your business can be significant, though most people don’t necessarily get formal valuations, so they don’t really know what it’s worth. You just never know. So, what do we do next for business succession planning?
Family businesses add another layer of complexity. Maybe Mom and Dad own the business, and now they’re bringing in the kids to be owners. How does that affect the dynamics, and who’s going to be in charge? Those are really important things to handle and plan for. The more you can plan ahead, the better.
I’m going to give you four steps in dealing with your succession plan—or at least taking steps into the planning process.
Step One: Whether it’s a family business or not, I encourage you to have meetings about this topic. You need to have open and honest communication. You need clear communication about expectations—who’s going to step up if something happens to the person in charge or the key person managing things. This will help reduce discord and lawsuits in the event of someone’s passing, when people might otherwise start fighting over things.
Ideally, you should have goals as to how this plan is going to be laid out. Some may be short-term goals, others long-term. But having these family meetings, having these discussions with open communication, is really important. It might take a couple of years before you really nail down what you want to do, but at least you’re having those conversations.
Sometimes these conversations can be challenging because you’re all relatives, and it can be uncomfortable to talk about this topic—you don’t want to make Mom, Dad, or cousins upset. That’s where a lawyer or an advisor can help. Having these meetings in a third-party office is really helpful. A conference room setting allows you to air things out with someone acting as a mediator—someone who helps keep communication open and honest without making it too personal.
So that’s Step One: family meetings or meetings in general.
Step Two: When you’re talking about this, it’s really important to have all the key players and relationships in place. What does that mean? You should have a clear idea of what this succession will look like if it happens suddenly—if someone dies—or if it’s a planned transition where you’re selling the business.
Key relationships include your lawyer, financial advisor, CPA, and possibly a business advisor or coach who can help you navigate the plan. If something were to happen to you as the business owner, your family and key personnel should know exactly who to contact and what to do next. It’s overwhelming when you’ve just had a big loss in the family—you want to grieve, but also keep the business going. So Step Two is to get your key relationships in place.
Step Three: Now it’s time to actually create the plan. The plan is a big deal—it could be something called a buy-sell agreement, shareholder agreement, or operating agreement. These are the types of documents used when multiple people own a business, especially when they’re not all family members.
Having that plan is really important because it answers questions like: What happens if someone gets divorced? What happens if someone gets disabled? What happens if someone wants to retire or be bought out? And of course, what happens if someone dies?
This plan is integral. It helps avoid rifts and disagreements that can turn into litigation—and litigation is expensive. You don’t want that to happen. The family should be able to look at this plan and move forward together, keeping the business growing as much as possible without too much discord. There will always be some challenges, but as long as the plan is in place and everyone agreed to it, you’ll already know what to do when those events happen. You’ll have a roadmap to continue the business successfully.
Step Four: This one is about remembering that all of these steps lead to one end goal—leaving a legacy.
I think a lot about Steve Jobs and Apple. I love reading about his life because it’s fascinating to see such a passionate person bring his dream to life and what it’s done for society. Of course, he had a team behind him—he didn’t do it alone—but he built a legacy that will last a long time. You can’t go anywhere without your iPhone, iPad, or Mac computer. He visualized a purpose of creating beautiful, well-crafted technology to enhance our lives. That’s the legacy he built and wanted to see through. Sadly, he passed away from cancer—something we can’t control—but his legacy has lived on.
I want to remind all business owners that your legacy is important. As we go through family meetings, identify relationships, and create the plan, remember that the umbrella objective is to take the hard work, sacrifice, and dedication everyone has contributed to make the company thrive—and ensure it continues well beyond your own lifetime.
At the end of the day, we don’t have a crystal ball, but we do know someday our time will come. The better prepared the next generation or next group of people who take over the business, the more successful the transition will be, and the greater your legacy will become.
We all start with the idea of wanting to make people’s lives better. Once that idea takes on a life of its own, we need to protect it—protect the big idea, the business, and transition it successfully to the next group of people. That’s what succession planning is all about.
I’m talking about it in a nutshell, but it involves many areas: estate planning law, taxation, and family dynamics. It can even involve psychology. I like to say there are soft issues and hard issues.
Soft issues are the relationships—how to keep the family or the business team together. Hard issues involve taxes, hiring, firing, and day-to-day operations. Both are equally important. You need to tackle both topics together to have a cohesive plan.
Again, my name is Maritess Bott. I work with many clients who want to talk about business succession planning and really draw out the details. I’ll help you identify those key relationships and think through the plan so you have the right foundation.
Feel free to call us, check out our website, and schedule an appointment so we can make sure you have the right plan for you, your family, your business, and most importantly, your legacy.
Thanks for watching, thanks for listening, and have a great day.
[Music]
