The two sides to succession plans for private businesses
February 16, 2024
By John P. Napolitano
There are two sides to a succession plan. One is for the operation of the company and the other is for the ownership of the deceased owner's share.
The business owners that we work with have a high percentage of their net worth tied up in the business and sometimes the real estate within which the business operates. The most common surprise is how little attention is given to the details of a succession plan that these business owners were given by their team of advisors. They all had CPA firms, attorneys, insurance agents, money managers, and a bunch of other suits around them giving advice within their silo of expertise, without making sure the plan was buttoned down from both a financial and an operational side.
Starting on the operational side, who is going to do the work of the deceased? In companies where you have a very strong founder who is still in the trenches for many things, this is a huge issue. These owners need to have conversations with their key employees immediately to talk through this possibility. I'm talking a real nitty-gritty discussion in terms of who does what.