Connecticut Business Succession Plan

Without proper succession planning, probably not the outcomes you’d want. Simply put, if you’re the sole owner of the business, the ability to operate and allocate profits or sale proceeds would be determined by your personal Estate Plan, if you have one.

If we’ve previously assigned your business to a Trust, we’re in good shape. If there’s only a Will or no Estate Plan in place, you should expect significant delays and headaches on the path to your family’s ability to operate the business. 

It’s also possible that business documents, like a Buy-Sell Agreement, Operating Agreement or Bylaws can speak to what happens, if any of those documents are in place. Bottom line is it’s situation specific, depending on the level of planning accomplished ahead of time. 

Certainly. I’m sure you don’t need me to tell you this, but life does what life does, whether you’re ready or not! The possibility of getting sick, injured, divorced, sued, or passing away unexpectedly, is unfortunately always there.

There’s a lot that’s outside of our control. When you own a business, you’re sitting on a huge opportunity, but while also bearing a major responsibility owed to your family, employees, etc. to get the proper planning in place—even if it feels like it’s on the early side!

Again, this all depends on the operative documents in place (or lack thereof). With no Business Succession Planning in place at all, we’re likely looking at your Estate Plan or the default (“intestate”) state laws determining who receives the value of your business equity. That person would then be in line to receive the financial value, assuming the business is net profiting. 

But is this dependency on your partner operating the business effectively, and timely paying what’s owed, something your love ones want to worry about? How would your business partner feel about having to pay out someone who isn’t showing up every day and contributing towards the business’ profitability? What if the roles were reversed?

A proper Business Succession Plan should cover the “what if’s,” and ensure a fair and practical response in these situations.  

Hey, just because you’ve decided to make a career out of running your business, doesn’t guarantee your family members want the same for themselves. These are highly personal discussions and decisions, and we need to be able to combat bad outcomes with education and options. 

If your children are not prospective purchasers or operators, we need to prospect for who is! We’ll explore the possibility of key, trusted employees serving in this role within the plan. We’ll also talk about backup options—like selling to a respected competitor, or making sure financial statements are in order for a business valuation to be produced so that a broker can find a qualified buyer, at an appropriate price point. No one size fits all, but starting the conversation as early as possible is very important!

Many factors are at play here. While our firm does not formally produce business valuations, we can connect you with other professionals who do.

For now, just know that the value of your business depends on a combination of factors—is it strictly a service business, or is there inventory, equipment or other hard assets to sell? Are there long-term customer contracts? How is the company cash flowing over the past few years? What type of payment structure would you be looking for (i.e., all up front, or are you willing to hold a Promissory Note)?

The analysis doesn’t have to be overwhelming. We’ll guide the process and land on a value that is both attainable and reflective of what you’ve worked so hard to build.

I love these conversations. Especially in what could be a challenging labor market, being proactive is always the right answer. It starts with identifying and understanding the value of certain key employees.

Then we need to figure out what’s important to them. We can leverage certain strategies—like a bonus or equity vesting schedule—that helps your people feel respected, see a future in the business, and ultimately drive up the probability that they’ll never see the grass being greener elsewhere!