We make
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Joan M. Ridley
Pres., CFP™, CEPA, CBI

2911 Turtle Creek Blvd., Suite 300
Dallas, Texas 75219

E-MAIL:  info@businesswealthsolutions.net
PHONE: 214.692.9192
FAX: 214.523.9001

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Some Day This Business Will Be Yours

Joan Ridley, CEPA, CBI, CFP™

That's a loaded statement. Give serious thought to what it means to your son, daughter, employee(s), or whoever you are talking to. To them, it could mean something entirely different than what you intend. Or maybe over the years, exactly what you have intended has changed.

Such a statement to family or key employees could mean that you intend to gift your business interest to them. Or, that maybe you will sell it to them for less than its true value. It could also mean that you will finance a sale for below market price and terms, or with no expectation of a down payment. Either way, be clear about your intent and your capability to follow through.

Sharing your good fortune can be a wise and generous strategy. Choosing the best strategy and executing it correctly, can add significant value to your business should you decide to sell to an outside third party. Gather all the facts first about your situation and the pros and cons of all feasibly strategies before moving forward, or making promises.

Facts to Consider

  • What are Your Motives
    • Reward employees for past performance and past loyalty
    • Secure their loyalty until after a third party sale is closed
    • Keep peace in the family
    • Maximize the value of your business
    • Reduce estate tax
    • Experience pure joy of your altruistic intentions
    • Commitment to follow-through because that's what you said you would do
    • Fear that your employees will leave if you don't share a piece of the business with them
    • Do you want to shift the long work hours and the risks of ownership, but still draw a handsome salary and perks
    • Do you want to have the final say about important strategic decisions
  • What are Your Needs
    • Are you at all dependent on income from the business or income from the reinvested equity, or, are you independently wealthy without any further economic benefit from the business? Seek advice from your financial planner and tax advisor about how much is financially feasible for you to give away, or sell for less than the value you could receive from an outside third party.
    • Personal impact on a family member if you transfer any ownership to one of them. Does he or she really want this responsibility.
    • The tax ramifications of any strategy you are contemplating
    • The implications of gifting ownership versus equity
    • The impact on company value in the eyes of the ideal buyer, Could this strategy actually reduce the salability for your business. Get expert advice before answering that question.
    • The impact on key people if you are not in a position to follow through on promises made. Will they leave.
    • The impact on other non-shareholder family members who might be disinherited
  • What are the Desires and Capabilities of the Proposed Successor
    • Are they credit worthy, if you will finance the transaction
    • Is their spouse totally on board with the risks and responsibilities of business ownership
    • While they might be a stellar manager, are they cut out for business ownership which requires a very different skill set
    • Will the other employees accept your proposed successor in an ownership position

Before giving any serious consideration to a strategy, bring together your advisors who have experience with such matters. Give them an opportunity to gather the facts and to help you carefully consider all of the benefits and drawbacks before moving forward, or before making representations that you might not be able to fulfill.

Joan M. Ridley is President of Business Wealth Solutions, a business consultancy that helps business owners create and implement their own life management plan. She is a Certified Business Intermediary, Certified Business Exit Planner, and a Certified Financial Planner™. In 2013 she received the first Excellence in Exit Planning Award conferred by the Exit Planning Institute for her pioneering contribution to this new discipline. She is the Founder of the North Texas Chapter of The Exit Planning Institute. Call 214-692-9192 and visit www.bwsllc.net.

Copyright 2014 Joan M. Ridley

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