Whether your business is law, construction, manufacturing, retail, or government contracting, and you require exit planning, asset protection, or a tax planning solution, our business has been "solving clients' problems" since 1977.

We recently wrapped up the Fourth Annual San Antonio Exit Planning Summit with our Exit Planning Exchange (XPX) San Antonio colleagues. A common theme was a sobering but vitally important one for all business owners: How sudden illness or death can complicate business ownership and exit plans.

Two stories stood out:

The first was about a partner in a well-known San Antonio retail audio business who suddenly passed away. The surviving partner realized that while the two had a buy-sell agreement for the business entity that addressed the death of a partner, they didn’t have a buy-sell agreement in place for three buildings they owned together (retail and warehouse). The partner’s wife inherited her husband’s portion of the building ownership, suddenly and surprisingly becoming his  new business partner.

The second story involves a husband and wife who owned and ran a San Antonio staffing and support services firm. The wife passed away recently after a battle with cancer. They made smart moves over the years to plan for the future but didn’t fully account for the emotional roller coaster the death of one spouse/partner would cause for the other. After more than a year of grieving and shifting priorities, the owner decided to significantly reduce his stake in his company, passing the baton to two longtime executives.

These types of scenarios involving sudden illnesses or death play out in nearly every family business at some point. Despite this, only 34% of family businesses have a robust, documented and communicated succession plan in place. Like those mentioned above, some took steps to lay a solid foundation but failed to predict the future with complete accuracy. No one can fully prepare for every scenario that may befall their business, after all. But you can:

  1. Understand your role in the business. That statement may seem offensively simplistic to a business owner, but those who built the business don’t always quantify or define what they do and what they mean to the company. The ExitMap® offers an online tool that can help you better understand how dependent your business is on you. It’s called the Owner Centricity Quiz, and you can find it at com.
  2. Communicate…and listen. The two parts to this advice are equally important. In PwC’s latest Family Business Survey, a solid 66% of owners feel their family members regularly communicate about the business, and 68% say that relevant information is shared in a transparent and timely way between family members. But, if asked, would the younger generations in the family business say the same? Is your communication style one-way? It’s not realistic or even wise to expect a business to operate the same generation after generation. Ignoring the questions, concerns, opinions, and ideas of those you expect to inherit the business one day is a critical mistake on two fronts: It alienates them and could keep your business from innovating. The issues this causes can be hidden for years and then suddenly amplified when an illness or death happens.
  3. Bring in experts. Smart exit planning involves outside experts who a) don’t have an emotional or financial stake in the business and b) are on top of the latest rules, regulations, and techniques for success. It takes a village—your attorney, CPA, banker, and sometimes others, including a valuation expert and exit planning consultant—to each work their magic. Why can’t one advisor do it all? As the opening scenarios illustrate, dozens of different aspects need to be weighed. Crafting water-tight legal agreements, considering tax ramifications, understanding (and perhaps reworking) your leadership structure, foreseeing stakeholder complications, and appropriately valuing your business are just some of the primary considerations.
  4. Review, revise, repeat. For every year that passes, changes in the business, tax regulations, economy, and your family mean that your exit plan should be reviewed and, at times, revised. Has an heir had a change of heart? Has a divorce entered the picture? Did the business pivot, expand, or change in another way? Have your business and personal assets gotten messily intertwined over the years? Has your health taken a turn? Do you understand how shifting tax laws affect your business? Don’t overlook how these changes can make or break your transition out of the business. Being proactive can genuinely secure your legacy.

These considerations are uncomfortable to address but doing so now is far less painful than discovering leaks in your life raft after tragedy strikes. Feel free to contact us with questions. We’re here to help.

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