A business is (and should be) much more than the alter ego of its owner, although in many cases, unfortunately, due to inadequate planning, the business and the owner are viewed as one and the same. It is not enough for the business to provide income and a certain lifestyle while the owner is active in the business.
To have achieved its fullest potential, a business must also be the vehicle for meeting the owner’s and his family’s financial needs when the owner leaves the business. And if there is one universal business truth, it is this – that the owner will leave the business one day, voluntarily or otherwise.
Understanding this truth is what drives the need for Ownership Planning. It has as its objective the owner's successful transition of the business; most importantly, that the owner will be able to leave the business when he/she wants… the way he/she wants.
Ownership planning is not the same as business planning, tax planning, retirement planning or estate planning, although, when done properly, it is coordinated with all of these other disciplines. As with other kinds of planning, Ownership Planning can be optimized when commenced early while many options and ample implementation time remain. Ideally, such planning is enacted long before the owner is “handcuffed” to the business or a trusted employee takes over vital customer/vendor/employee relationships and runs.
Too often, however, Ownership Planning, is reactionary; that is, an event happens (e.g., a downturn in the economy) that forces the owner to abruptly and unexpectedly leave his/her business. But a slow economy is just one example. It could be the sudden disability of the owner, bad press or the departure of a key manager. These events may not always be predictable; however, each of the events can lead to the sudden departure of the owner on less than optimal terms. This is why as an owner it is essential to plan – and to plan early – as life happens and none of us has a crystal ball to foresee the future.
So where does an owner begin? Next time – the Legal Audit.