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In my experience, both professionally and personally, the owner of a solely-owned business or closely-held business is as much in love with the business as he/she is with his/her children and/or spouse. Of course, that is overstating it — for some. 

For those whose business is a major part of their identity and their success, ensuring that the business continues to be around to provide income to the entrepreneurs loved ones and to provide jobs to the employees is an integral part of their estate and business planning. For these folks, the two are inseparable. 

For a successful result, the entrepreneur should consider his/her exit strategy options. For those clients who see sale of the business, merging the business with another company, or even an initial public offering on a public stock exchange, the time to start investigating those options is, frankly, yesterday – today at the latest. Those options take years to achieve and the entrepreneur considering them needs a lot of professional help to get there. 

For those entrepreneurs whose exit strategy is sale to an employee stock option plan (or “ESOP”), similar timing and professional assistance applies. 

For those who desire that family members or key employees run the business for the entrepreneur (and eventually, the new owners when the entrepreneur dies), there is also a need for an investment of time, energy, money and professional advice for the transaction to be successful. 

None of this is news to the entrepreneur. The challenge is always a combination of a few basic reasons: 

  1. I am too busy with the business to address succession today, this week, this year.
  2. Replace “too busy” in (1) with “too expensive” “not time yet” “too complicated”. They are all reasons why the planning keeps getting deferred. None of such reasons are excuses, and again, we all know that too. 
  3. I don’t want to create conflict among my family members ad/or employees by choosing among them regarding the future ownership and/or control of the business. They will work together to figure it out. 

To this third reason, my “go-to” response is a “group of people cannot successfully make a sandwich without conflict. How is a group going to determine the succession of your business’s leadership and ownership when you are no longer here or you are incapacitated? 

The answer to my, admittingly cheeky, question is simple: they cannot. Your employees and loved ones need a plan that emanates from you. 

My suggestion to entrepreneurs is to seek advice as to how others have done this type of legacy planning. You do not have to reinvent the wheel in order to create a plan that will work for your situation. 

In addition to qualified attorneys who work with entrepreneurs, there are also many other professionals, such as bankers, financial advisors, investment bankers, certified financial planners, CPAs, and insurance advisors who have experience in advising entrepreneurs with succession planning. The good news is that even though each specific situation is unique, it is not the first time those professionals have brough a client’s plan to a successful result and, therefore, even though the entrepreneur is new to the succession-planning game, these others are not.

Finally, there are business groups of entrepreneurs who either have been through this type of planning or who are going through this planning at this time. Reach out to one of the professional advisors described in the previous paragraph in order to receive a referral to such groups.