What happens to your business after you're gone?
You've spent a lifetime building your business. But you can't run it forever. Death, disability, or just retirement... there are a number of ways your business can pass from your hands.
What are some ways you can pass on your business when the time comes?
1. Transfer the Business to Your Heirs
Have you dreamed of passing your business on to the next generation? Many entrepreneurs dream of doing just that.
But some planning is involved in making that dream a reality.
Who in your family wants to step into that role?
Are they qualified —or can they be trained —to take on that responsibility?
Interest and suitability aren't always the same thing. Talk honestly to the family members who want to step into your shoes about what's involved with running your business.
What about family members not actively involved in their business?
What types of roles will they play?
Will they have decision-making power in the business?
What percentage of ownership will they get?
Providing financially for family members who aren't active in the business could include receiving assets of equal value to those working in the business.
Will you be bought out ahead of time?
Consider the financial implications of a buyout, such as how that will impact your retirement strategy and where to find the funds.
Is your family .... complicated?
Like it or not, family issues can come to a head when it's time to hand down your business. Identifying and handling them now can help prevent internal strife from destroying the business after you're gone.
2. Sell the Business to Your Partner(s)
You may have every intention of selling your share of the business to your business partner(s), but without a proper agreement in place, it can be tough to do.
When one business partner dies, their share in the business typically passes to their spouse.
Spouses often lack the interest or knowledge needed to run the business.
If you and your business partners want to ensure shares stay with the remaining partners, a buy-sell agreement financed by insurance is helpful.
In the event of the death or disability of a partner, the insurance proceeds can be used by the remaining partners to buy back that partner's shares, rather than using business cash-flow to fund a buyout.
3. Sell the Business to a Key Employee
Do you have an employee who has proven their worth, dedication, and loyalty to your business?
Selling your business to a key employee is an option for succession when you don't have an heir or business partner.
Typically, financing this transaction can be a hurdle for most employees — few are in the position to make a sizable purchase like this.
Consider seller financing — you receive a percentage of the businesses' value at the sale and the rest of the payments over time— or a business loan to help your key employee become your successor.
4. Sell the business to an Outside Buyer
Selling the business to an outside buyer at the highest multiple possible is the dream of many business owners. But finding a ready, willing and able buyer ready to accept your price and terms within your time frame isn't always easy.
Some factors can make it easier to sell your business to an outside buyer, such as the business's ability to continue running without you.
Understanding the potential value drivers that can make your business more or less attractive to buyers and attending to them now may help you sell later.
If you've got questions about how to plan your business succession, let our experienced independent insurance agents at Aegis Insurance Markets get you answers. We can help you formulate the right plan to ensure your plans for the future of your business are met.