Succession or Exit Planning

Understanding the difference between business succession planning and estate planning is important.

Business succession planning involves the life of the business while estate planning deals with the life of the business owner. Two separate plans, yet a business owner must integrate and coordinate both plans because one directly affects the other.

Many clients are concerned about the successful transfer of the family business to the next generation. Because the baby boomer population is reaching or has reached retirement age, researchers estimate that 65% of family owned and closely-held businesses are transitioning to the next generation. In addition, we are seeing a significant shift in succession planning in that 20%- 25% of these businesses will have cousins working with cousins rather than siblings working together. This creates an entirely new set of succession planning challenges.

The problem is that most family owned or closely-held businesses will not survive.  Statistics show that less than 30% of family owned or closely-held businesses survive to the second generation and less than 10% survive to the third generation.

The most common mistake that business owners make is assuming that succession planning is solely a business, financial or legal process. Business owners must also consider and integrate relational issues, family dynamics and non-financial concerns into the succession plan.  Successful business succession plans include three major components: Family/Relational Dynamics, Ownership Dynamics/Return on Investment, and Management Dynamics/Profitability. 

The key is to get clarity on where you are and where you want to go.  Navitas has the practical experience and expertise to help you develop and implement a business succession plan that accomplishes your goals and objectives.