Business succession planning

Why are you in business? Most people would answer that question with varying emphasis on different threads in the same theme. Such as “to be my own boss”, “to control my own destiny”, “to build an asset”, “to secure my family’s financial future”

They are all great reasons and sometimes you need to stop “doing the business” for a few moments to reflect back on the “why” that made you start it in the first place. If you don’t, sometimes the business ends up running you. If your head is down focussing “in the trenches” you might forget the big picture: At some point you will retire!

You can retire “vertically” of your own accord and walk away to the next phase of your life or you can retire “horizontally” carried out at a ripe old age or taken prematurely in tragic circumstances. Either way, you won’t be running your business for ever.

Business succession planning means planning for that day. This means diversifying your wealth outside the business, maximising the business value for sale, considering if the next generation can take over. The list of possibilities is long and often complex.

A successful business with revenue that is not totally dependent on the work of its owner will have a value, hopefully a significant value and will indeed have a huge impact on the owner’s financial future and retirement but have you ever heard someone say “my business is my super?”. That is the “all your eggs in one basket” strategy. Apart from a lower risk profile, the owner who has used the cash generation of their business to build wealth outside of that business has something the “my business is my super” owner doesn’t. CHOICES!

We recognise that the success of your business is the crucial ingredient for your financial future but encourage you to see that tax effectively diversifying your wealth outside your business reduces your “big picture” risk

What happens in the event of the “horizontal” exit? Is the continuity of your business important to you? Will the business stop when you are no longer there to drive it? Does its value drop since potential buyers know they are dealing with a distressed seller. Does the bank get nervous, do suppliers pull back credit accounts and demand COD terms? Do staff or clients leave?

Do you have a business partner or partners? Would they want to be in business with your wife? Do you want your family to depend on your business partner doing the right thing? Would certainty over the business ownership and certainty on the value your family receives make you sleep more comfortably?

Insight Wealth Partners can help you prepare for the planned exit from your business and can put a plan in place to protect the business and your family in the event of the unexpected exit.

An insurance funded Buy/Sell agreement is a specialist piece of advice with many traps and pitfalls for the novice adviser. It requires a specialist, such as an accountant to value the business and a lawyer experienced in the area to draft agreements as well as an adviser to help put the appropriate insurance policies in place to provide the funding. With three different professionals involved you may find yourself confused with who is supposed to be doing what!  You can benefit from our experience to project manage this process for you and ensure you get the right outcome for your business and your family.

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