Midlands Business Journal August 28, 2020 Vol. 46 No. 35 issue

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• AUGUST 28, 2020 • Midlands Business Journal

Business Succession & Transitions

A section prepared by the staff of the Midlands Business Journal

August 28, 2020

Timing is key for planning, implementing business succession by Dwain Hebda

When it comes to a successful business succession plan, experts say timing is everything, from when the plan is put together to when it’s executed. “Start planning early; there usually ends up being far more issues to work through than initially anticipated,” said Katie French, partner with Lamson Dugan and Murray. “Discuss timing issues, such as what transitions will happen during Palzer the business owner’s lifetime or while still involved in the business versus what will happen after retirement or death. Both sides of the transaction may not be on the same page about these logistics.” French said advance planning allows businesses to guard against the unforeseen and provides flexibility to react to market changes. “Be prepared to implement the plan sooner if necessary,” she said. “Sometimes unforeseen events occur that require implementation of a successor earlier than anticipated. Those business that have a succession plan will be able to adapt and move forward seamlessly.”

Katie French, partner at Lamson Dugan & Murray. Business succession is hard to approach their business decide that they would also be dispassionately, which is why business owners equally successful at selling their business. should never undertake the process on their But the practice of the business itself and the own. selling of the business are two very different “Going it alone is the biggest mistake things. This is too big for DIY or some form I have seen, time and time again,” said Jeff you found on the internet.” Palzer with Kellogg Palzer. “I have seen Palzer said most successful businesspeople business owners who are very successful at have a team of professionals around them for

managing the business and that same approach should be taken when it comes time to exit. “The individuals who helped make the business owner successful should be part of making the transition successful,” he said. “A CPA can advise on the best tax strategy for the sale of the business; a business attorney can advise on the best structure of the sale and so on.” Palzer also warned about emotions as another major pothole in the process. “Sometimes busiHamm ness owners take [the process] too personally and that costs them opportunities to sell the business at the highest and best value,” he said. “Owners need to be laser-focused on selling the business at the highest and best value; taking anything personally risks getting the best price for the business.” Part of the problem with many business owners is a failure to commit to the succession process, causing unnecessary delays and missing out on potential buyers. “The most common mistake I see in business owners is the failure to really commit to seeing the process through,” said Brandon Hamm, attorney with Koley Jessen. “Many owners initially express interest in drawing up a succession plan, but then lose focus as they get swept up in putting out day-to-day fires with the business and working ‘in’ the business, rather than ‘on’ the business. These types of business owners have a rolling fiveyear exit plan that never really gets finalized and implemented.” Once again, emotion should be kept in check, especially when family members are involved. Hamm said family dynamics can muddle the waters when it comes to succession planning, due to unclear or absent communication. “Oftentimes business owners overestimate a family member’s desire to take over a business or their ability to do so successfully,” Hamm said. “These miscalculations create tremendous risk to the successful implementation of a succession plan and the financial security of the departing business owner. “Family dynamics undoubtedly complicate succession planning. When family dynamics are at play in a succession planning process, communication is critical.”

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