With economic pressure throwing a few wrinkles into retirements/exit timetables, many owners of family operated transportation businesses are facing succession plan decisions much earlier than anticipated. Failure to address/adjust plans while considering today’s economic climate/forecast as well as your current business value could subject your retirement plan to severe risks.
Having your son or daughter take over your business may be the best investment you ever make toward your retirement. Or it may not be. If your current retirement plans hinge on a son or daughter buying or taking over your transportation business, you may need to ask some tough questions to reinforce that this is the best way to protect what may be a 20-30 year investment.
Get to the heart of the matter:
The family needs to have an honest discussion with the potential heir about whether or not he or she truly desires to take over the business. If their heart is not in it for the long haul, you need to know now—not later. If passionate about the business, ensure he or she fully understands the time and stress commitment that will not only be required to be successful but also to produce a return on your investment.
It’s the Jimmies and the Joes:
My brother Chase, a Texas high school football coach, says on occasion, “It’s not about the X’s and the O’s; it’s the Jimmies and the Joes.” Meaning—He can draw up the perfect game plan, but he can’t win unless he has the talent on the field to execute it. You may have a great business plan, and your son or daughter may have been watching you operate the business for years. But your child is not you. Does he or she currently possess the necessary skill set (management, sales, financial, operations) to effectively run the business and protect your investment? If the potential heir currently does not possess some or all of these skills, is there complimentary talent in the organization to offset current deficiencies while the heir is still developing? It’s a family business, but it is still business. Try to resist allowing love to confuse a very important financial decision.
Time is ticking… into the future:
Is the potential heir ready to take over now? If not, what are you risking by waiting? If your son or daughter’s readiness, desire or talent are in question, can you afford to wait on commitment or skill development? Optimal tax conditions are here now and the future of the business and the economic/political conditions ahead are less certain. Remember: Your children have a lifetime to build wealth…you don’t.
Family business is messy business. Again, incorporating your son or daughter’s talent and ambition into your retirement plan may be the best investment you ever make. As the economy adds tension to an already stressful process, make sure your family and potential heir of the business are all on the same page. Protect your most important financial investment, and give yourself an opportunity to adjust your succession plans if necessary.
If Charles Tenney & Associates can provide you assistance in structuring a business sale to a family member, or help you evaluate if selling to a family member is in the family’s best interests, please submit the contact form below.
