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V O L . X X I I N O. X X V I N OV E M B E R 1 4 , 2 0 1 6 18 C onsider this: Some 35% of Fortune 500 companies are family con- trolled, according to Conway Center for Family Business. Family businesses account for 64% of U.S. gross domes- tic product and generate 62% of the country's employment. ey account for 78% of all new job creation. But within the next 30 years, nearly all family-owned businesses will lose their primary owner to death or retire- ment and approximately $10.4 tril- lion of net worth will be transferred. Further, nearly one-third of family owned businesses do not have a succes- sion plan. is is not only potentially troublesome for the economy, but it is also bad for family-owned businesses. The importance of a succession plan One third of family-owned businesses have a succession plan and 30% of family-owned businesses survive the transfer to the second generation. e correlation between planning and sur- viving could not be more direct. What makes succession planning diffi cult for family-owned businesses is the family itself. For starters, the subject can be diffi cult to broach. Family variables, such as who will step into the leadership role, make such transitions more unique. e plan will need to take into account estate taxes and related taxes and fees. Start planning early and consider these four factors: 1. Inclusion: If you want to keep the company in the family, involve the next generation in its operations as early as possible — even if they are children. You want them to feel a sense of ownership and have an understanding of the company's values, culture and position within the market. 2. Development: Identify potential leaders and create a personal and professional development plan that they are held accountable for ful- fi lling. is will help position them to be successful once they step into their leadership roles 3. Vision: Formulate and com- municate a short-, medium- and long-term plan for the company. Seek input from others. is will ensure that there are common goals and defi ned strategies for achieving them — with or with- out current leadership 4. Execution: Successful transi- tions involve plans that are clear, well defi ned, fair and transpar- ent. Understand that some family members may not be satisfi ed with the outcome, but good communi- cation can strengthen continuity and prevent confl icts. Remember, each family is unique and each has its own history that shapes the company and its culture. Developing a focused plan is the best way to overcome these challenges. The fi nancial side of the succession plan In simplest terms, succession planning is really about transferring owner- ship and control of a business to a new party. e better positioned the company is for success and the more attractive it is to buyers, the more value the company will have. Even if the plan is to keep the com- pany in the family, fi nancial needs and fi nancial planning remain paramount. ere are a number of strategies to transfer ownership of family-owned businesses to the next generation, including gifting, diff erent types of sales and estate freezing. In each of the above categories, there are a number of other solu- tions. And just as your family and business are unique, the arrangement for transitioning your business to the next generation of family ownership should also be unique. To ensure these unique needs are met, build a strong professional advisory team consist- ing of an attorney, an accounting fi rm and a bank. is team can provide you with the guidance your business needs to thrive in your absence, as well as ensure your fi nancial needs are met for the remainder of your lifetime. MiCHael R. WalP, a senior vice president and market sales leader at Key Private Bank in Maine, can be reached at miCHael_r_ W a l P @ K e Y b a n K . 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