Business Planning
Business Planning
With businesses increasingly focusing on diligence, operational improvements, and infrastructure, many overlook the disruption and financial consequences of a lack of risk-related strategies.
Business protection is the number one priority for owners—and has been since 2010.
Succession planning has increased significantly. Confidence in succession plans is at its peak.
The most popular succession strategy is to give the business to family members.
A significant increase in the number of owners saying they are not sure where to start is the thing that prevents them from planning for the financial health of their business.
Almost two-thirds of businesses are family-owned.
Almost 70% of family businesses don’t make it through the second generation.
Only 30% of family-owned businesses survive into the next generation, 12% to the third.
The 2023 Principal Business Owner Insights survey is based on 1,000 online interviews conducted in January 2023 by Dynata. Family Business Alliance, fbagr.org/resources/cited-stats, as of April 2023.
Although protection is a priority, many businesses have limited strategies for the tax, obligations and legal risks that could arise if something happened to its key people, owners, or partners. Ensuring these strategies are carried out professionally, within regulation, and cost-effectively is paramount.
Business Planning Strategies and Solutions:
Buy-Sell Agreements
Cross-Purchase
Entity Purchase
Multi Owner
GP, LLC
Bankruptcy
Wait and See
Trustee
Estate Planning
Inheritance Equalization
ESOPs
Sole Owner Transition
One Way Buy Sell
Select By Out
Installment Sale
Business Succession
Succession planning is the process of identifying the key factors that help make a particular owner’s business successful, e.g., management, employees, customer relations, owner involvement, etc. and creating a blueprint that helps support these key factors when a business transitions from one owner to the next.
Most owners focus on creating, supporting and growing the business
That lifetime of sacrifice creates a singular focus
The general thought on succession planning is, “It will take too much time” or “I haven’t thought about this.”
Just as a business plan can be vital to the creation and ongoing success of a business, a business succession plan is vital to the continued success of a business after a key owner has left.
What would happen to your firm, investment or company if the people who generate the revenue or lead the organization become disabled, pass away or have a chronic illness?
Key Person
The simple answer is the business suffers. Sales-heavy, family, private equity, and financial firms are particularly vulnerable to key person risk as the nature of the business often means there are personal relationships with clients.
These people are typically the key drivers of innovation and leadership. As you know, it is nearly impossible to formulate a process or business model that consistently delivers. This level of success is, as many businesses are, reliant upon a select few leaders.
The permanent or temporary loss of a key person eventually leads to the loss of present and future business, the loss of relationships with important contacts, not to mention the office workflow issues that would inevitably arise. In addition, the effect of a loss of leadership would create uncertainty in any investment(s) and corporate capital would be allocated to finding a replacement. The costs of the loss of a key person due to any cause can easily put a company into absolute chaos, both operationally and financially.
There are tax implications associated with the funding, ownership and benefit payment of these insurance policies. Additionally, there are complexities in insurance product design and contract structuring. Vanbridge can help identify and implement solutions that are right for you, your business and your key employees.