3  Inescapable  reali.es:  Death,  Taxes  &  Business  Owner  Transi.on  

Inescapable  Reality  #1:  Business  owners  are  mortal  and  death  is  inevitable  

Inescapable  Reality  #2:  Businesses  are  subject  to  tax  and  the  IRS  will  collect      

Inescapable  Reality  #3:  Business  owners  will  exit  either  on  their  own  terms  or  because  of  point  #1  

For  the  record:  Heirs  report  that  death  is  a  horrible  business  transi.on  strategy.  

5  false  assump.ons  business  owners  make    

#1:  Children  should  be  equal  beneficiaries  Thus,  children  become  equal  partners  regardless  of  their  knowledge,  experience  or  prior  involvement  in  the  business.    Children  must  grieve  the  death  of  a  parent  and  simultaneously  work  through  partnership  issues  to  make  business  decisions.  

#2:  The  children  can  take  over  my  business      When  this  assump.on  is  not  tested,  children  receive  a  giQ  they  didn’t  want.    In  many  cases,  heirs  are  ill  prepared  to  handle  the  business  challenges  they  now  own.  The  emo.onal  toll  on  the  family  and  the  strain  on  the  business  created  significant  obstacles  that  could’ve  been  avoided.  

#3:  Employees  are  loyal,  skilled,  and  will  carry  on    Many  .mes  the  owner  is  the  glue  that  holds  a  business  together,  but  they  underes.mate  their  intrinsic  value  and  the  degree  of  tacit  knowledge  they  possess.  This  blind  spot  increases  the  transi.on  complexity  because  these  aUributes  are  oQen  the  secret  sauce  behind  the  business  success.    If  the  secret  sauce  is  not  transferred  effec.vely  the  business  (and  the  heirs)  will  suffer.  

#4:  If  I  take  care  of  legal  and  tax  issues  everything  will  be  ok  Legal  and  tax  planning  are  important  aspects,  but  they  are  not  a  comprehensive  or  strategic  transi.on  plan.  Business  owners  must  plan  for  the  vacuum  created  in  organiza.onal  structure,  leadership  and  capacity  when  they  are  no  longer  in  place.  

#5:  The  business  can  always  be  sold  if  necessary  All  too  oQen  SME  owners  assume  their  business  has  value  and  heirs  can  liquidate  if  necessary.  However,  business  income,  sales  volume  and  even  profit  may  not  be  enough  to  give  the  business  sufficient  market  value  to  be  aUrac.ve  to  savvy  buyers.  

What  is  a  business  owner  to  do?      

Develop  a  comprehensive  transi.on  plan  that  considers:  1.  Tax    2.  Legal  structure  3.  Business  health  &  sustainability  4.  Economic  forces  5.  Organiza.onal  leadership  6.  Owner  &  Family’s  future  aspira.ons  

www.planfortransi.on.com  

 

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