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  • Eric Watchorn

Corporate Considerations

A business reality - eventually every business stops doing business.

A thought – and a reality – that is often not faced head on. We get excited, start a business with passion, work hard, succeed, and often, we expect things to go on for as long as we ‘feel’ like continuing on.

One day you may sell your business, or perhaps you will close the doors, or perhaps there is a wonderful succession game plan.

Any of these steps and outcomes have a psychological effect on the business owner. Planning for it is ignored, procrastinated upon and in the end hurts the business owner the most.

Many advisors, lawyers, and accountants have seen that if YOU do not plan for the succession of your business voluntarily, that you unfortunately will likely have that decision made involuntarily for you. It is also known that the involuntary aspect of this decision includes much disagreement and disenchantment.

The voluntary aspect of a sale or succession is what everyone wants.

So, why would anyone NOT Plan for a Voluntary Sale or succession?

When you consider the involuntary consequence and learn about death, ill health and bankruptcy, one would have to wonder why any small business owner would ever allow their "baby" to be subject to an involuntary disposition. It is not unusual where there is an involuntary disposition, that the ill business owner or their estate (if deceased) receive only cents on the dollar for the business. Yet business owners do not plan for their succession in astoundingly huge numbers. In 2015, US Trust undertook an extensive Wealth and Worth survey… (have not found a similar survey in Canada yet suspect that it is similar here):

The survey reflected that an astonishing 61% of small business owners do not have a formal plan for the orderly succession of their business. Since in most cases, informal plans are not worth the piece of paper they are written on (although, most informal plans are verbal), these business owners are flirting with involuntary business dispositions. The U.S. Trust survey noted these reasons business owners do not have formal succession plans. They include (with my comments in parentheses): 1. No plan to retire anytime soon (which means: they don't want to retire) 2. The decisions have yet to be made (which often means: they are procrastinating on deciding between long-time employees, their children or an arm's length sale) 3. Others are aware of their wishes (which means: there is no formal plan and a disaster is waiting)

4. A will is in place to cover the succession plan (which means: pretty much the same as #3 above)

5. They are too busy to think about it (which means: they don't want to think about it)

6. They will not face their mortality

7. They do not want to accept the fact that if they hand over the reins to someone else, the company may function without them (which means: they can't accept they are not the company)

If you are a business owner, review the seven reasons above, and see that this is a psychological obstacle for most that is overcome by planning for your business succession. A conversation over coffee about your wishes and what is most important is a great first start.

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