To run a business is all about planning. It is fine to live in the moment, yet it is also necessary for you to consider both the past and possible future events. Succession planning can be surely considered a future event which all businesses have to consider or face disaster.
What is succession planning? Well, it is simply a plan put in place that recognizes the business should outlast the key people running it. The classic example used by financial planners is the business that is family owned. The parents often want to pass it down to a child or children. Doing so makes sense logically, but there are a host of tax issues involved. Planning for them is critical.
What happens if you don’t plan for the succession of the business? Well, the Miami Dolphins are a good example. They and the beautiful stadium they play in were owned by a gentleman named Joe Robbie. He had a large family and was very successful. Despite having lived a long life, he never planned for his passing on. When he passed away, estate and income taxes kicked in along with the acceleration of certain contracts that he had personally guaranteed. His estate did not have the cash on hand to deal with the taxes and debts. As a result, it was forced to sell the team and stadium among other assets for a song. The massive figures paid in taxes need not have been paid if succession planning had been done.
The Robbie situation is well known because of the assets involved. One just doesn’t see an NFL team sold off to pay taxes every day. The underlying problem, however, is a common one that occurs in the business world practically every day.
Otherwise profitable businesses are left in shambles or sold off for pennies on the dollar because no succession plan was put in place.
If you are the owner or key member of a business, succession planning is something that must be part of your administrative checklist. To forgo it is to invite doom upon the business.
Thomas Ajava writes about succession planning for UFCAmerica.com where you can obtain professional advice on small business succession planning.