Hartford Business Journal

32 HARTFORDBUSINESS.COM | JULY 24, 2023 It's Never Too Early to Plan Your Business Succession By Joseph Confessore, Senior Vice President, Washington Trust Private Clients Group, Certified Exit Planning Advisor (CEPA) F ewer than one in four private com- panies report having a succession plan in place. 1 It's understandable. You are so focused on the day-to-day op- erations and immediate challenges of run- ning your business that it's easy to push planning for the future to the back burner. However, waiting too long to develop a succession plan leaves the organization vulnerable to disruptions and a leader- ship vacuum, putting at risk the long-term survival of your business and the preser- vation of the wealth you've built. The bottom line: It is never too early to start planning your business succession. Bring in the Professionals The first step is engaging with qualified professionals (wealth and investment advisors, accountants, lawyers). Certi- fied Exit Planning Advisors (CEPA) have earned a designation specifically to advise business owners on how to sell or transition their business successful- ly. Once assembled, your team should work with you well in advance of any solicitation or offer to navigate the com- plexities of succession planning and address not only the technical business items (such as corporate restructuring, business valuations, tax efficiency, and regulatory issues), but also the equally important human side of a successful transition (family dynamics, employee engagement and retention, corporate culture, change management). Derisk the Business Look at diversification in your client base and supplier network. Conduct a thor- ough review of your assets, liabilities, contracts, and customer relationships to ensure they are in order. Are business insurance levels adequate to cover inter- ruptions or losses? This is a good time to organize your financial records, update your business plan, and address any operational inefficiencies. Accelerate Business Value Assess your competitive position and emerging opportunities, and ways to strengthen your assets, both tangible (e.g., cash, accounts receivable, inventory, and fixed assets) and intangible (e.g., reputation, workforce, supplier and customer relationships). It's important that these assets are transferable to future leaders or potential buyers. Can your business function without you at the helm? Owner dependence is a major threat to succession plans and ongoing viability. Develop a Tax Strategy Early planning is especially critical to reduce or mitigate the tax impact of business succession. While some tax planning options can be identified and implemented at or shortly before a trans- action, many require several tax years for maximum effectiveness. With sufficient time, for example, you can consider gift- ing plans for shares/interests, executive compensation plans, corporate-owned life insurance, redomestication (for the business) or change in residency (for the owners), and corporate restructuring. To minimize tax liabilities and optimize finan- cial outcomes, you can (and should!) de- velop a multi-prong, multi-layer tax strat- egy tailored to your unique situation, so long as you start planning early enough. Identify Potential Successors Early succession planning allows you to cultivate a strong leadership pipeline, enabling you to maintain continuity and reduce the risk of a leadership vacuum. Ideally, the transition from owner to suc- cessor should be a gradual process over a period of years. Communicate Early and Often Early succession planning enables you to have open and honest conversations with your family members, partners, and key stakeholders to help to manage expectations, resolve conflicts, and align interests and objectives. Transparency and full knowledge are critical com - ponents to driving accountability and engagement with the process. If your business is a family-owned enterprise, it is crucial to involve family members in the succession planning process. Washington Trust: Creating Success in Succession At Washington Trust, we look at suc- cession planning as an integral part of running a business, and we know what it takes to create a successful transi - tion. Our Private Clients Group has the experience and expertise to guide you through the process of developing a solid business succession plan that will help you build your legacy, prepare for your retirement, grow your business, and protect your assets. It's never too early to start. Contact Joseph Confessore at 800-475-2265 x1439 or jmconfessore@ washtrust.com. SPONSORED CONTENT 1 New Research Spotlights CEO Succession Challenges. https:// blog.nacdonline.org/posts/new-research-spotlights-ceo-succes- sion-challenges

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