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Succession planning for your business, your family, and yourself

The Knoxville News-Sentinel logoThe Knoxville News-Sentinel 4/5/2021 Eddy R. Smith
a man wearing a suit and tie: Eddy R. Smith is an attorney with Kennerly Montgomery in Knoxville, focusing on planning and litigation related to estates, trusts, businesses and nonprofits. © Courtesy of Eddy R. Smith Eddy R. Smith is an attorney with Kennerly Montgomery in Knoxville, focusing on planning and litigation related to estates, trusts, businesses and nonprofits.

You’ve spent years logging long hours doing whatever it took to build your business into something that you’re proud of and that supports your and your employees' families.

You’ve built a loyal customer base that appreciates the value you provide.

You’re appreciated in the community for what you’ve created.

Although they’ll never know as much or work as hard as you, the next generation of leadership is growing into their roles. After all your efforts, you’re ready ... to flush it all down the toilet.

Baby Boomers, ages 56 to 75, own approximately two-thirds of the privately held businesses in the U.S., representing an estimated (pre-pandemic) $10 trillion of value.

Whether you plan to retire or not, if you’re a Boomer owner, the reality is you likely have 5-15 years remaining before you voluntarily or involuntarily cease to be the driving force of the business.

Will your business survive without you? Will it thrive? Will you harvest reasonable, in some cases life-changing, wealth for yourself and your family? What will you do the first Monday you’re no longer the boss?

Consider:

  • Only 30% of family businesses survive through the second generation.
  • Only 20% of businesses on the market actually sell.
  • 78% of business owners have no formal transition team, 83% have no written transition plan, and 49% have done no planning at all.
  • 93% of business owners have no formal life-after-business plan.
  • 75% of those who exit their businesses “profoundly regret” that decision within 12 months.[1]

How do you buck these depressing statistics? Plan.

Those who work simultaneously on the transferability of their business (business succession planning); their individual and family wealth picture (financial planning and estate planning); and the questions of who they’ll be and what they’ll do when they’re no longer running their business (personal “what next?” planning), are those who (1) successfully transition the business to family members or employees or sell it to the right strategic or financial buyer at the right price, and (2) successfully transition personally to a new phase of life and purpose.

Perhaps it is time to create and implement a plan. A combination of attorney, CPA, CFP/wealth advisor, business advisor and (when you’re ready to sell) investment banker, with a knowledge of you, your business, and the path to transition, can make all the difference in ensuring the continuation of the business and unlocking for you and your family the value you’ve created.

[1] Statistics taken from Christopher M. Snider, Walking to Destiny: 11 Actions an Owner MUST Take to Rapidly Grow Value & Unlock Wealth (2016).

Eddy R. Smith is an attorney with Kennerly Montgomery in Knoxville, focusing on planning and litigation related to estates, trusts, businesses and nonprofits. This column is provided through the Knoxville Bar Association, your trusted source for lawyer referrals. The KBA is a nonprofit corporation that offers community service programs such as the Lawyer Referral & Information Service, speakers’ bureau and public education programs. Find more information on our website at www.knoxbar.org or call (865) 522-6522.

This article originally appeared on Knoxville News Sentinel: Succession planning for your business, your family, and yourself

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