Two Types of Planning Needed
Many owners already have one of the two essential types of transition plans, the Contingency Plan, which provides for their family and the business in the event of untimely death or disability. Contingency Plans, however, address the atypical situation.
The more likely prospect is that the owner will not die prematurely or become disabled, but that he or she will live a natural lifespan, and at some point will want to redefine his or her relationship with the business.
This requires a Living Transition Plan, which addresses transition of the business to its successors. This includes planning for a change in ownership, management or management structure—depending on the client’s situation.
Creating a Living Transition Plan involves a complex matrix of personal, financial, family, managerial, and legal issues—not to mention the emotional challenge of significant change. Business owners often must ask themselves questions such as:
- Given my lifestyle, how will the business transition impact my financial security?
- Do I want to give up control of my business? If so, how much control, when and to whom?
- What impact will my transition have on the financial strength of the business?
- How will other shareholders and/or my employees be affected?
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