Indianapolis, IN (PressExposure) February 27, 2007 -- INDIANAPOLIS - No one likes to think of their mortality, and entrepreneurs are no exception. But there comes a time when enough is enough - it's time to retire. For whatever reason a business own decides to retire, not having a comprehensive success plan in place may cause irrevocable damage to a business. According to the U. S. Small Business Administration, 90 percent of the 21 million U.S. businesses are family-owned, and a third of the Fortune 500 companies are either family-owned or family-controlled. Yet 30 percent of these companies tank in the second generation (that percentage doubles in the third generation) because the owner failed to plan for his departure.
"There are many reasons why this occurs," said Gary Pittsford, CEO and President of Castle Wealth Advisors, and Indianapolis-based, fee-only financial advisory firm. "They're not ready to give up control of a thriving enterprise, or they haven't confidence in any one senior manager to take charge." If family members are involved, that adds another layer of complexity and potential conflict some owners of closely held businesses would rather avoid.
A comprehensive business succession plan lays the foundation for a smooth transition from one company president to the next. "If a business owner dies without a succession plan, his will and trust dictate how stock is divided," said Pittsford, "and that may not be the best choice for preserving the business and protecting the owner's family." Pittsford advocates six areas that need to be addressed for a succession plan to be comprehensive:
â¢ What type of corporation does a business owner have? â¢ How are family members involved in the company? â¢ How will an owner transition stock? â¢ How do owners secure a comfortable retirement? â¢ How do owners minimize personal and corporate taxes during a transition? â¢ How do owners write wills and trusts that protect him, his family and his business?
Comprehensive succession planning creates layers of protection for families and their businesses. "It helps owners develop a financial blueprint to follow, which will protect their business," said Pittsford. And it helps owners treat their family members fairly and equitably whether they work inside or outside the company.