What’s Your Plan for Business Succession?
It’s a critical issue in rural Nebraska communities. Who will take over small rural businesses and farms? And how will it happen? REAP has had the opportunity to work with several businesses through the process of selling or buying an existing business.
Our success story this month tells about a business REAP worked with as it bought out “Oh Fudge,” and Jerry Terwilliger tells about a business transfer plan he worked with in the Panhandle area in the article below.
The whole matter of business transition can be difficult, especially when there aren’t many available or interested folks to take over. Otherwise, it’s just a matter of getting all the key issues mapped out and planned ahead of time. It is important to take time and work through the process so the transaction has a chance of a win-win result for the parties involved.
The Federal Reserve Bank of Kansas City – Omaha Branch partnered with Creighton University School of Law – Community Economic Development Clinic and the Nebraska Business Development Center at Wayne State College recently to prepare a guide book for business succession.
HomeTown Competitiveness (HTC) is interested in taking this further with the communities involved in HTC and getting more people and businesses involved in addressing the business transfer needs in their communities. REAP is always available to help individual businesses through some of these issues and processes.
The new guidebook “Will You Be Ready for the Finish?” points out the basic considerations surrounding this issue. It discusses the “why” of owners needing a succession plan.
Owners need a business plan because of factors such as those included below:
- To address personal financial needs.
- To minimize taxes and avoid tax pitfalls.
- To provide time to maximize the company’s value.
- To allow for future growth.
- To provide contingencies for the unexpected.
- To retain valuable community products and services.
The guidebook lists some of the questions imbedded in researching and finding
solutions to business transfer. They include:
- Taking a snapshot of the company now – what are the needs of your current operating business?
- What’s the valuation of the business and considerations to make?
- What are the business owner’s personal and financial goals?
- Who are key business advisors to help you?
- What are the financing considerations of the business transfer?
- Who are potential successors in owning the business?
- What is the transition plan – what will happen until the transfer?
- And how will you exit?
For an online copy of the guidebook, see http://www.kansascityfed.org/comaffrs/business%20succession-owners%20guide%20final.pdf.