business exist
-
Upload
madhura-kodithuwakku-hewa-mallika -
Category
Business
-
view
77 -
download
1
description
Transcript of business exist
BUSINESS EXIT & SUCCESSION PLANNING:A VALUABLE SERVICE TO ADD TO YOUR CPA PRACTICE
B U S I N E S S E X I T A N D S U C C E S S I O N P L A N N I N G C O M M I T T E E
S E P T 2 0 1 3
SUCCESSION VS. ESTATE VS. EXIT PLANNING
SEPT 2013Business Exit & Succession Planning Committee
1
SUCCESSION VS. ESTATE VS. EXIT (CONT’D)
•Exit Planning: process an entrepreneur goes through to determine his/her plan to leave the business
SEPT 2013Business Exit & Succession Planning Committee
2
This usually involves the transition of both
ownership and management
responsibilities and should usually be
done before estate and succession
planning.
WHY SUCCESSION PLANNING?
Overwhelming raw statistics from a number of studies and articles:
They need help. Consider the rates of succession statistics:
SEPT 2013Business Exit & Succession Planning Committee
3
• Family businesses comprise 80-90% of all business enterprises in the U.S.
• 40% of family companies say they will transition leadership in next five years
• 88% say same family(ies) will control business in five years
• 30% survive into second generation
• 12% survive into third generation
• 3% operate into fourth generation
WHY SUCCESSION PLANNING? (CONT’D)
•40% of family companies that will transition in next five years are without a “how to” plan•Less than 2/3 of significant holders in family business know senior generations’ share transfer intentions
There appear to be some
reasons why they need
help
• 2007 American Family Business Survey:• #1 of top 10 challenges facing Family
Businesses today = succession• Same survey: spouse is closest advisor;
accountant is next
Owners know the issue; and
CPA’s are perfectly
positioned
SEPT 2013Business Exit & Succession Planning Committee
4
WHY SUCCESSION PLANNING? (CONT’D)
Without a plan or process, most entrepreneurs and management teams hope succession will happen-- hope is not a strategy
SEPT 2013Business Exit & Succession Planning Committee
5
WHY EXIT PLANNING?Exit Planning is a proven process that can maximize
the financial return, minimize the tax liability, plan for
contingencies and increase the likelihood of a successful
transfer of a business
85% of all small business owners do not have an
exit plan, a wealth management plan,
and/or an advisory team to assist them
Very few start the process early enough
to achieve the maximum benefit of
exit planning
Most entrepreneurs wait too long; instead make the “end game”
part of your overall operating strategy
SEPT 2013Business Exit & Succession Planning Committee
6
WHY EXIT PLANNING? (CONT’D)
A written Exit Plan based on the
owner’s objectives
An experienced team of advisors
to design and implement the
plan
Time
Ingredients of a Successful Exit Plan:
SEPT 2013Business Exit & Succession Planning Committee
7
WHY EXIT PLANNING? (CONT’D)
Most business owners spend more time planning a family vacation
than how to exit from their business
This is not due to a lack of desire or intelligence. It is simply because they
don’t know how or where to begin
The vast majority of owners are unaware there is a specific planning and
implementation process that can help ensure they achieve their objectives
SEPT 2013Business Exit & Succession Planning Committee
8
• Has good feel for leadership style of potential successor; can bridge the generations (and keep the client)
• Will be more company versus personality/ family member focused
WHY THE CPA’S ROLE IS CRITICAL
Can help document the
overall processes
Coordinates other outside advisers
(legal, estate, asset managers, etc.)
Provides a very objective viewpoint
Inner Sanctum Access- you are the “trusted advisor”; you should be a critical piece of the
Succession and Exit Planning Process
CAPABLE OF “OWNING”
Knows the business and the numbers
9
SUCCESSION PLANNING PROCESS
Seven step documented process to achieve successful transfer from Current Management (CM) to Successor
Management (SM):
Determine how the
succession planning process will work including
a communication plan
Consider the view of the CM including objectives, timing
and personal matters
Determine the financial needs of the CM who is
retiring and the viability
of the business to
support those needs
Consider the
potential SM including
capabilities, comfort
with supervising
former peers and
role acceptance
Understand the role family
members will play in
the company including
those outside the
business and future family
members
Maintain a process which provides for
periodic reviews to determine
viability of the Succession
Plan including after the plan is in place and
is being executed
Incorporate an
appropriate methodolog
y for transferring
wealth in accordance
with current
shareholders’ desires
SEPT 2013Business Exit & Succession Planning Committee
10
EXIT PLANNING PROCESS
Identify
owner exit
objectives
Quantify business
and personal financial resource
s and needs
Maximize and protect busine
ss values
Ownership
transfer to third
parties
Ownership transfer to inside
rs
Business
continuity
Personal
wealth and
estate plannin
g
SEPT 2013Business Exit & Succession Planning Committee
11
NEXT STEPS?
Business Exit & Succession Planning involves many skillsets and capabilities; some of which just come from experience. The best and easiest thing to do is to join the Business Exit & Succession
Planning Committee of the NYSSCPA. The purpose of this Committee is to educate CPA’s on these subjects.
If you are interested, please reach out to the Chairman, Bernie Leone or any committee member listed on the NYSSCPA website.
SEPT 2013Business Exit & Succession Planning Committee
12
NYSSCPA SEPT 2013
NYSSCPA Business Exit & Succession Planning Committee13