Assuring the Successful Continuation of Your Family Construction
Helping Contractors Grow Great Businesses.
Assuring The Successful Continuation Of Your Family Construction Business
As a business owner, you might think nothing is more important than running your company. More important though, is how you protect it. How do you ensure all your years of hard work do not go down the drain?
Here are a few questions to ask yourself:
Am I working years, possibly even decades, to build my business only to eventually lose it?
Will there be infighting within my family over the business?
What will be my family and business legacy ultimately be?
Terrance Resnick and Leon Resnick of Resnick Associates told CONEXPO-CON/AGG 2017 attendees that with proactive planning, you can avoid costly mistakes in transitioning your family business from one generation to the next.
The family business is the backbone of the American economy. Of the 23.3 million businesses in the United States, 90 percent of them are privately owned and controlled. Unfortunately, two out of every three family businesses will not make it from the founder to the second generation. Only about one out of six will make it from the second to the third generation. Each generational succession is more difficult. Even if you’ve transitioned to more than one generation, you must remain proactive.
The leading cause of business failure is inefficient succession and estate planning. Succession planning is the deliberate and systematic effort by a company ensure leadership and ownership continuity. Estate planning is the effective preservation and transition of personal and business wealth.
The leading causes for unsuccessful succession are:
No plan or an ineffective/outdated succession plan
Inability to retain key executives and personnel after the owner exits the business
A disastrous personal estate plan, in which the company is left to an inactive spouse and/or family
The remaining liquidity position is weak
There are several critical steps you must take to ensure succession planning goes smoothly. As you navigate the process and consider all of the scenarios that make your business unique, be sure to consider the following issues:
Define your personal goals and vision for the future and identify a successor
Use techniques to reduce or eliminate estate taxes
Ensure proper liquidity positioning to avoid the forced sale of the company and provide for estate equalization
Use stock transfer techniques to help achieve succession goals
Conduct an independent review of existing documents and life insurance contracts to confirm they meet current objectives
When executed poorly, succession planning can bring a once successful business to its knees. The most common mistakes people make when succession planning are:
Unrecognized estate size and corresponding tax that will be owed
Poor liquidity position
Improperly arranged life insurance
Lack of specialize planning
These mistakes can be avoided when business leaders are engaged and committed to the process.