Does your family business succession plan have longevity?
We generously estimate that less than one in five family businesses stay alive for more than two generations. Why? Because they have no succession plan in place. It cannot be assumed that because a business is owned by a family and is successful for a generation that it will continue without careful planning and understanding, for generations to come. It is also often a great shock to people without a succession plan in place, that their family wealth and business will be hit with heavy tax penalty if a strategy is not in place to mitigate tax.
All too often, the requirement for lifetime and beyond succession planning is realised too late and the blood, sweat and tears poured into a family business is wasted needlessly as future generations are not prepared for what is required to continue that success and pre-empt the costs incurred when a smooth transition strategy is not in place.
When it comes to family businesses, a question commonly searched and one frequently asked by our clients is ‘what is a succession plan’, followed by, ‘should I have a successions plan’ and ‘how do I create a succession plan.
We will address questions 1 and 2 but ultimately for all business owners the answer to question 3, it is a firm and resounding yes! But what does that entail and where do you start?
First, let’s look at the five key points a business owner must address to ensure succession and survive the generations:
- Ensuring buy-in and involvement from the next generation
- Continual growth
- Accepting and adapting
- Long-term planning
- Lifetime Business Tax Plan
Now let us look at these key points, one by one.
Ensuring buy-in and involvement from the next generation is essential. A succession plan should not start at the point the owner is concerned they cannot continue, be it for health reasons, a desire to retire, a change in circumstances. A succession plan should begin whilst the current business owner is fit, well and growing a thriving and profitable business. By involving the next generation in your business whilst you are healthy and enthusiastic you have the advantage of passing on values, attitude, and spirit. You are in a position to ensure they are already a valued part of the business and not just the accidental successor or clueless owner. Risk is reduced by ensuring a smooth transition of authority and ownership. Remember, for them to enter succession with the same enthusiasm as you feel now, they need connection. Make them a part of your plan today! This may be by entrusting shares, sharing information, mentoring, or ensuring their financial security within your planning and strategy.
The continual growth of a business, as we all know, is not just about profit. Economic change is constant and family businesses must constantly adapt to meet the challenges this brings. Therefore, continual growth and understanding of this is a key element of succession planning. A succession plan is not a onetime plan, rigidly set out and to be followed by each generation; it is a growing and adapting strategy. It is a lifetime plan that is ever on the table, used more as a tool for success than a set of rules. By ensuring optimum tax efficiency, naming successors and beneficiaries, understanding how to manage and change these criteria as the business grows and use it to full advantage of the company is an essential element of a lifetime plan.
When it comes to your family business succession plan, accepting and adapting is a fundamental part of the strategy. If your plan is robust and well considered, it will easily allow for continual adaptation to meet change and growth head-on. By this, we mean that as well as businesses, families change and grow. Your succession plan for today may be very different to the succession plan in place as the next generation move into the business. However, by creating the right lifetime and beyond succession plan now, that flexibility is embedded throughout.
We have already talked about long-term planning, and this is an obvious element for all business owners and a constant struggle for many. Whilst busy running the company today, finding time for lifetime and beyond planning often seems like something that can wait. This has been the downfall of far too many family businesses which, with just a short time spent putting a lifetime and beyond succession plan into place, could have continued through the generations. All the above points, and many more, are key to long term planning for a business. When talking specifically about succession, long-term planning must account for continued expertise within the company, vision for the future, the foresight to pre-empt economic change, we could go on. However, once again, with a strategy in place that allows flexibility and control, long-term planning for succession brings relief, security, and a route for lifetime and beyond continuation and growth of the family business.
So, this brings us on to our ultimate point, The Lifetime Business Tax Plan. At the centre of your family business succession plan is the fundamental requisite, which is to protect your business and your family, whilst still ensuring business growth, meeting your own lifestyle and retirement plans and the ability to continue to meet challenge head on. Whether that challenge is ensuring cash-flow within the company, adhering to shifting government policy and change, achieving a flexible retirement path, avoiding the often-disabling huge tax bills and protecting your wealth from penalty or simply knowing how succession will be implemented, you need a plan.
The Lifetime Business Tax Plan is an all-in-one solution to protecting wealth at the same time as growing it for the generations to come. This carefully constructed tool for business owners exclusively, is made up of two key elements:
An Investment Trust Fund
The fundamental premise of The Lifetime Business Tax Plan is to give company directors the control and the ability to protect their wealth for their family and put the mechanics of succession into place whilst continuing to grow their business. The Lifetime Business Tax Plan focusses specifically on overcoming the issues of investing company profits, mitigating company and inheritance tax, allowing company directors to invest at their own discretion and in addition, ensuring they are able to grow their pensions without the impact of huge tax penalties. By fusing these two powerful components, innovative and formidable strategies can be created for you, the business and to provide a secure future your children, whatever the succession plan you have in mind for the business.
The Lifetime Business Tax Plan is the ultimate succession planning solution to not only protect your wealth, but also grow it for generations to come.
Contact us today and allow us to create a tailored solution to suit your personal situation.