Will the next generation want to carry on the business after you are gone? If so, are they capable? How many family members are dependent on or involved in the family business? Will the business survive a transition to the second generation? How about the third? Is a third party sale to a financial or strategic buyer an option?
If these questions have crossed your mind, you may benefit from having a discussion with a family business advisor experienced with best practices that can make a significant difference to both your business and family in the exit planning process.
I recently spoke with Shayne Stephens, a Certified Family Business Advisor and President at Landmark Advantage, a Multi Family Office located in Markham, Ontario (www.lmadv.ca). Shayne and her co-founder, Jamie MacBride work with business owner families to help construct, oversee and manage the exit planning process. Being a Certified Financial Planner (CFP) and a Trust and Estate Practitioner (TEP), Jamie is the perfect complement to Shayne’s background in behavioral sciences, organizational development and communication specifically in investment and wealth management. Landmark Advantage specializes in working with family businesses with revenues in the range of $2M to $10M and a family net worth up to $30M.
According to Shayne, "While the primary role of the family business advisor is to focus on the overall process and work to integrate the interactions of all the moving parts within the family, ownership and the management groups, they also support the business owners to facilitate and manage issues and concerns of the individuals that may be impacted within each of these groups throughout the process."
I asked Shayne to share how a family business advisor helps the family through the exit planning process. Shayne enthusiastically responded with these 5 essential elements:
- Start with a High Level but Comprehensive Assessment - unique individual and family values, needs and goals are identified up front and a comprehensive assessment of the technical documents and current situation is undertaken to determine areas which require deeper analysis, detail and consideration;
- Educate and Communicate – exit planning is a process and one that many family businesses generally will only go through once so it is imperative to get it right! Areas of discussion include: life after exiting; pros and cons of each exit option, strategies for enhancing business value and minimizing taxes, wealth management plans, impact on the family, etc.;
- Oversight and Managing the Implementation – a poorly executed plan will lead to missing goals, diminished value of the business or possibly not having a salable business, paying too much tax and not being prepared for unforeseen circumstances such as death, disability, dispute or divorce. Family business advisors understand that both good planning and proper implementation of a comprehensive exit plan ensures that the business owners are better prepared to leave their company on their terms and on their schedules with their families intact;
- Keeping the Process Moving - many issues (family, business, personal) will surface creating obstacles that could potentially sabotage the exit planning process. The family business advisor is there to keep the lines of communication open and to speak frankly about difficult issues including resolving conflict in order to keep the process moving; and
- Involve Other Experts When Required – Shayne recognizes the importance of working collaboratively with other professional advisors as part of the exit planning process. According to Shayne, "Exit planning is a multidisciplinary endeavor; no single professional advisor has all the expertise required for effective exit planning. The family’s current advisors offer a very important sense of history and insight into the family and their business that is important to retain and build on. Our approach is to draw on these existing resources and work with everyone involved to ensure we are all operating from the same premise toward the same goals. That being said, there generally is a need to bring in experts from other fields to support the clients in making informed decisions relating to issues that arise during this important transition."
Shayne and Jamie represent one component of an experienced and professional team of practitioners in the accounting, tax and estate planning, valuation, legal, M&A, insurance, investment management and management science areas which are necessary to implement a family business owner’s exit plan effectively.