Strategies to consider when crafting a business succession plan:
“You need to start planning three to five years in advance, whether you are going to sell to an outside person, transition to a family member or sell to inside management. You need to train the successor to be able to take over the functions of the head of the company. Too often when they are selling a closely held or family business, the parent makes the assumption that the child has been around them long enough and knows (how to lead). They should formalize the training of their successor.
“You really need to clean up your financial statements. If you can, pay down your debt, clean up your receivables and if you have non-business assets or expenses in your business statements, get them out. If your plan is to sell to management, they’d better be involved in this (succession) plan. And they’d better know about it.
“You should have a growth or sales plan in place when you’re trying to market the business, to show how the business will get to the next level of sales. And make sure your management team has considered this and can show a potential seller that this is a plan that they could pick up and run with. I always start by looking at what the business owner’s objective is in passing a family or closely held business. That is often considered when they have one or more children (who will receive the company). They want to be sure that the company carries on and thrives even more.”
— Liz Kaiser, shareholder and CPA with Winter, Kloman, Moter & Repp S.C., a Brookfield-based accounting firm
“Family members need to think about how they want to divide the pie. That’s very important. Are there sufficient assets that the working children (in the business) can receive and the other children can receive other assets? What do you do if you have three children and only have one that wants to work in the business?”
— Nancy Bonniwell, attorney and managing partner of the Delafield office of Weiss Berzowski Brady LLP
“The No. 1 goal (of succession planning) is the success of the business, but you rarely hear people talk about it. Make sure that both parties have their own representation, legal, accounting and other. And get all of your advisors working on the plan. It’s important to have a good team of an accountant, attorney, an insurance guy and your banking relationships.”
— Bill Mayer, CPA and partner with Milwaukee-based RitzHolman CPAs
“If it is a management buyout, you want to incentivize the management team during the transition. Shift control and leadership over time so they are seamless to clients, and so your employees begin to respect the new management. Bring your management into the financials over time. On the emotional side, the seller needs to be ready to step back. When your family and business are devoted to the business, it can be hard to step back.”
— Jayne Schultz, shareholder, CPA and head of tax department with Brookfield-based Vrakas/Blum S.C.
