Succession Planning How to concoct a good exit strategy By LYNNE JETER
In uncertain economic times, planning for the future – retirement, selling a company, or transitioning a family business into the next generation – is critical to maintaining financial stability in a medical practice. Despite industry projections reflecting that half the nation’s active doctors will reach traditional retirement age by 2020, and physicians typically live into their early eighties, very few practitioners are succession ready.
Plan Ahead
Plan years in advance to mitigate risks associated with succession planning. “The earlier, the better,” said Jim Weiss, senior vice president and commercial banking executive for Fifth Third Bank (Tampa Bay affiliate). “One to three years is short and the bare minimum. Sometimes, depending on the complexity of the issues at hand, it can be 5 to 10 years in the making.” Why? The legal, financial and tax implications of succession planning can be extremely complex, based on the organizational structure of the business, composition of ownership, and whether the business will be sold to employees, a third party, or transferred within the family. Trying to resolve issues just prior to
a sale or transfer is virtually impossible to do properly. There’s too much value at stake,” said Weiss. “You should start early and over the years make changes as the business evolves. It’s not unusual to start down one path and then course correct as conditions change. As an example, by starting earlier, you’re able to diversify the business, which can add significant value. And if competitive landscape changes, you can be prepared to move quickly … whether your goal is to sell, exit, acquire or grow. Without early planning, and on-going maintenance of that plan, it will be more difficult to achieve your goal.”
in the healthcare industry, for example, will help doctors better understand the process and may bring major players in the industry to the table to garner maximum dollars possible.”
Ask about the Money
Succession planning isn’t very expensive. Compared to the value created, the process becomes quite affordable. Succession Planning Involves Determining How One “Providing solutions could Will Transfer Wealth To The Future Generation. get expensive, but doesn’t need “That game plan changes frequently, depending on life events,” to be,” explained Weiss. “Imagexplained Jim Weiss, senior vice president and commercial banking ine having a lawn overgrown with executive for Fifth Third Bank (Central and North Florida affiliate). weeds and vines. The longer you “For instance, a 35-year-old with young kids should make sure they let it go, the tougher and more have very good insurance coverage. Once children are through college and the company matures, the focus should turn to the next expensive it’ll be to get it back step – succession planning. Anyone who owns a company should be into shape. But if you maintain thinking about the long-term position of their business.” it, the incremental investments are much smaller. Depending on how active you are with managin significant estate tax savings and help Find the Right Wealth ing personal affairs, it could be simple adjustavoid potential conflicts between family Management Advisor ments, but if we undo years of neglect, it can members,” said Weiss. “If the goal is to Accountants and attorneys often recpotentially grow into a complex and intensell the company, business owners need to ommend involving a wealth management sive project. The bottom line is start early work with someone savvy in their indusadvisor to the succession team to provide and maintain often – you won’t regret it.” try. This has many advantages, including critical financial planning advice prior to having the network and inside knowledge the business transition. Be Candid to take that business to the correct poten“A wealth advisor can identify and According to the Institute for Family (CONTINUED ON PAGE 10) tial buyers. Having a bank with specialty help rectify potential issues that result
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