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3 Tips for Keeping Your Family Business Transition Plan on Track

February 17, 2021 4 Min Read Family Business Structure, Family-Owned Businesses
Steven E. Staugaitis, CPA, CVA Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader


Several factors must be evaluated when starting on a family business transition plan in order to increase your chances of a success. Here are three tips that are essential to keeping your family transition plan on track.

  1. Know the steps in a transition plan. The first part in embarking on any process is having an idea of what steps or decisions need to be taken. In structuring a family transition plan, there are two key elements – the leadership succession and the ownership succession. I am going to focus more on the ownership element, which I have broken down into four key areas.
    • Establish goal congruency with both the senior generation and the next generation. This is the first and arguably one of the most important steps. The motives and needs of both parties are what should ultimately drive which structure(s) are deployed. This is particularly critical for the senior generation, which needs to be prepared to convey their retirement “number” and the level of involvement they plan to have with the family business going forward.
    • Perform a financial analysis of the company. The objective here is to gain an understanding of a reasonable range of values for the business as well as to evaluate the company’s ability to handle a transaction. This is especially important in situations where payouts will be made to the senior generation that will be funded either directly or indirectly from the company’s cash flows. In almost every transaction, the business becomes a vehicle for funding future payment streams.
    • Structure the transaction. After understanding each generation’s goals and objectives and performing an analysis to determine what is feasible for the business, you are then in a position to structure a transaction. Without spending the proper time on these first two elements, an abundance of time and resources can be wasted on making assumptions and addressing “what-ifs” that may never materialize. This step involves running a variety of scenarios and evaluating the tax implications of each.
    • Monitor the financial implications of the transaction. The final step of the process is making sure that to the extent there will be multiple owners after the transaction, that they will be starting off on the right foot. This entails making sure a sufficiently drafted shareholder agreement is in place.
  1. Understand what it takes to work through the transition process. It’s healthy to have clear expectations about what is entailed during the transition process and the length of time it will take. The leadership development and succession planning component often takes years. In fact, five to seven or more years would not be unusual. Think of all the knowledge, expertise, and intuition the senior generation has developed over the years and what it will take to transfer that to the next generation.
    As for structuring and implementing an ownership transfer, each step along the way has its own timeframe; six months to a year or two is not uncommon. There are many heavy decisions that need to be made along the way. Many plans I have worked on are a multi-year process, where in the early years we are setting up the corporate framework that provides flexibility and options for accomplishing the ultimate ownership transition.
  1. Tap additional resources for help. Lastly, it is very important to make use of your outside advisors. Select one to be a quarterback and to help keep track of the progress and follow-up steps.

Transition planning is very easy to set aside when emergencies arise in the business – easy to put down and hard to pick back up. As you are working through the process, you will find other opportunities to strengthen the business and increase the likelihood for success. Having an emergency plan in place, updating your estate plan, setting up sound family business governance, or implementing a next generation development program are all ways to improve operations and increase your chances of success.

As you take these tips into account, remember that it is important to focus on progress and not perfection when implementing your family transition plan. You can always tweak what you are doing, but you have to be doing it first.

Steven E. Staugaitis is a director at Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email or 215.441.4600.


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Steven E. Staugaitis, CPA, CVA

Steven E. Staugaitis, CPA, CVA

Director, Audit & Accounting, Small Business Advisory Services Group Leader, Family-Owned Businesses Group Co-Leader

Family-Owned Businesses Specialist, Small Business Advisory Specialist, Business Valuation Specialist, Transition/Exit Planning Specialist

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