When meeting with small-business clients, some questions I often
ask are: "When you retire, who will manage your assets so you can
continue to live the lifestyle to which you have become accustomed?
Will it be your children? Your key employees? Your job
Most small-business owners do not realize if their succession
planning has not been addressed, the people who will manage their
companies not only will determine their incomes following
retirement but also whether they will have businesses from which to
For many business owners, the subject of a succession plan is
not addressed until it is too late and the values of their
businesses already have declined. When succession is not addressed
earlier in the life cycle of a business, a business owner often is
forced to retain an income from the business that amounts to a
return on his lifelong investment. If subsequent management
falters, the retiree will have lost income and a decreased asset
value if the business is liquidated.
From the successor's standpoint, being forced to pay retirement
income creates a problem by depriving the growing company of the
lifeblood it needs to grow-cash. In most situations, this income
could be used to expand the business, hire employees or purchase
equipment. A business's failure becomes a possibility when these
factors force the two generations to realize there is no plan to
survive, let alone succeed. As a result, families...
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