Owning a family business requires thoughtful succession planning.

Family businesses come in all shapes and sizes.

Some offer goods.

Others offer services.

According to a recent The Tampa Bay Business Journal article titled “Selling a family business: Plan to maximize value and preserve wealth,” estate planning and succession planning are essential to any of these businesses.

Family business succession involves both the personal and the professional.

Individuals invest a great deal of time and money into their businesses.

Many businesses owners have between 70 percent and 80 percent of their wealth in their business.

This is an intimidating fact when one considers how research demonstrates only 20 percent to 30 percent of businesses going to market actually sell.

Essentially, this leaves one-in-eight business owners with few options to use the value of their business to create financial security in the future.

Yikes!

Owners of a family business have a host of concerns when it comes to retirement, incapacity, or death.

By selling a business, will they be forfeiting an important income stream?

With they be able to support their current lifestyle in retirement?

What will they do with their time when they retire or sell the business?

Who will manage the business if the owner dies or falls ill?

What strategies are available for capitalizing on the value of the business?

All of these questions underscore the value of creating an exit plan for the family business now.

Even the most loving family experiences conflict from time to time.

The stress of either running or being released from the business decisions can be overwhelming.

About 70 percent of family businesses fail after being passed to the next generation.

Double yikes!

Many children of businesses owners either do not desire to continue work in the family business or cannot afford to purchase the business from their parents.

About 82 percent of adult children of business owners would prefer to simply have the business sold and inherit the cash, according to UBS Global Wealth Management.

It is important for business owners to understand their options for exiting and seamlessly transitioning the business.

Your business exit strategy should be designed to survive death, disability, divorce, distress, and disagreements within the leadership team.

The owners of a family business should focus on growing the value of the business rather than simply generating income.

Doing so makes it more appealing to new owners.

How does one focus on the future?

Owners of a family business should have strong contracts, an experienced and trustworthy management team, and a solid succession plan.

Exiting the business should be done when the value is high and you can control the terms of your departure.

Although you can simply gift the family business to the next generation, this must also be done thoughtfully and with the future in mind.

Working with an experienced estate planning attorney can help you navigate your options.

Reference: Tampa Bay Business Journal (Nov. 29, 2021) “Selling a family business: Plan to maximize value and preserve wealth”