Benefits of Succession Planning
When you look at the benefits of succession planning, it is hard to understand why everyone isn’t rushing out and doing it. A business is probably the biggest, or one of the biggest, assets people own. Succession planning helps your client get the most out of that asset.The biggest succession planning benefits are:
Taxes can be minimized through proper organizational structuring. Setting up a holding company or a family trust, along with other tax-saving strategies, can make a big difference in the amount of taxes your client pays. A tax specialist experienced in business sales can help do this. But to take full advantage of the tax savings, some of these strategies must be implemented at least two years before the sale.
Higher Sale Price & Better Terms
After developing and implementing a comprehensive exit plan, your client’s business will likely become more profitable and more efficient. Assuming that the business is showing better results, its value will also be enhanced as a result of focusing on the important value drivers; buyers will perceive it to be more valuable, and it’s their perception that matters. With this positive perception, your client’s business will attract the right type of buyers—the ones who will pay more and offer better terms.
Putting Your Client In Control
In the absence of planning, the buyer will control the sales process. The seller will forever be playing catch up, trying to provide the information they require. This places your client in a weak position, one that is hardly conducive to a successful sale.
Selling a business can be emotionally draining and extremely stressful. When thoroughly prepared for every step along the way, there will be no surprises and your client will be able to make every decision quickly with complete confidence. Your client will be prepared for each step and able to focus on her business rather than scrambling around trying to collect information, putting out fires, and delaying the process.
If your client waits until the last minute to start preparing for the sale, there’s a much better chance that her employees may become suspicious when she starts doing things she’s never done before and receiving visits from advisors. When she starts planning years ahead of the sale, employees will become comfortable with the idea that she is simply trying to improve the business.