GetMoore Media
A Comprehensive Succession Plan Can Help Your Business Endure
By: Jeff Moore
Family businesses account for 80 to 90% of all business enterprises in North America 1. They also provide 60% of U.S. employment, 78% of all new jobs, and 65% of all wages paid 2. But, essentially all of these businesses will lose their primary owner by death or retirement by the middle of the century. For the business owner, retirement is a light at the end of the tunnel. For others it is a sense of freedom and reward or an oncoming locomotive at full speed. A business is only as valuable as the return a person is able to derive from ownership.
Seven out of ten businesses fail each year due to improper succession planning. Comprehensive succession planning may be the most critical issue facing the American economy over the next few decades. The creators / controllers of this wealth must decide how to best pass their ownership interests to subsequent generations while still trying to perpetuate these entities. Equity may easily constitute more than 90% of a family's financial security, retirement nest egg, and potential legacy. According to statistics only about 30% of all businesses will pass to a second generation, less than 10% will pass to a third, and about 4% will go to a fourth 3. The three leading causes of failure to transition to the next generation are:
1) Inadequate estate planning
2) Insufficient capitalization
3) Failure to prepare the next generation
All of this leads to an increasing demand for better planning. It also leads to a need for integrated training systems, more carefully administered business issues, and the responsibility to think, act, and operate in a more formal business-like fashion.
The Succession Solution
A comprehensive succession plan will address the needs of the family, the desire of the owner, and the demands of the business. There must be a healthy progression in the life of a viable family enterprise and the current owner must connect the past and present to the future through a process of planned transition.
A proper transition is built on the framework of the following five steps:
1) A dynamic business plan
2) An ownership transfer / leadership development system
3) Wealth creation / capital management
4) A fully funded retirement option design
5) An estate plan
To avoid becoming one of the seven out of ten businesses who fail each year due to improper succession planning it is essential that a business understands and implements these five steps. "There is no escaping the passage of progress," says Jeff Moore, local business planning expert. "Threats from outside, the lack of qualified skilled employees, and constant legislative administrative pressures did not all happen overnight."
Jeff Moore, President of JM GetMoore Insurance Services has dedicated almost 10 years to educating business owners about the effects of improper succession planning and how avoiding this pitfall can make them become more profitable and increase their chances of survival.
For a complimentary consultation, contact local business planning expert,
Jeff Moore at (956) 928-1811
1. Family Business Review, Summer 1996
2. Financial Planning, November 1999
3. Family Firm Institute (Joseph Astrachan, PhD., editor,
Family Business Review)
