1. Business Exit and Succession Planning Committee Sept 2013
Business exit & Succession Planning: A Valuable Service to Add to Your CPA Practice
Business Exit and Succession Planning Committee
Sept 2013

2. Succession vs. Estate vs. Exit Planning
Succession Planning is a formalized process to successfully transfer company leadership from Current Management (CM) to Successor Management (SM). It is designed to ensure the ongoing viability of the company.
Estate Planning is a process designed to successfully transfer company ownership (wealth) from current shareholders to future shareholders (or others). It is designed to address the personal goals of shareholders and is structured to achieve the most economic and tax efficient result possible.
SEPT 2013
Business Exit & Succession Planning Committee

3. Succession vs. Estate vs. Exit (Cont’d)
Exit Planning: process an entrepreneur goes through to determine his/her plan to leave the business
This usually involves the transition of both ownership and management responsibilities and should usually be done before estate and succession planning.
SEPT 2013
Business Exit & Succession Planning Committee

4. Why Succession Planning?
Overwhelming raw statistics from a number of studies and articles:
They need help. Consider the rates of succession statistics:
Family businesses comprise 80-90% of all business enterprises in the U.S.
40% of family companies say they will transition leadership in next five years
88% say same family(ies) will control business in five years
30% survive into second generation
12% survive into third generation
3% operate into fourth generation
SEPT 2013
Business Exit & Succession Planning Committee

5. Why succession planning? (Cont’d)
There appear to be some reasons why they need help
40% of family companies that will transition in next five years are without a “how to” plan
Less than 2/3 of significant holders in family business know senior generations’ share transfer intentions
Owners know the issue; and CPA’s are perfectly positioned
2007 American Family Business Survey:
#1 of top 10 challenges facing Family Businesses today = succession
Same survey: spouse is closest advisor; accountant is next
SEPT 2013
Business Exit & Succession Planning Committee

6. Why Succession planning? (Cont’D)
Without a plan or process, most entrepreneurs and management teams hope succession will happen-- hope is not a strategy
SEPT 2013
Business Exit & Succession Planning Committee

7. Business Exit & Succession Planning Committee
Why Exit planning?
Exit Planning is a proven process that can maximize the financial return, minimize the tax liability, plan for contingencies and increase the likelihood of a successful transfer of a business
85% of all small business owners do not have an exit plan, a wealth management plan, and/or an advisory team to assist them
Very few start the process early enough to achieve the maximum benefit of exit planning
Most entrepreneurs wait too long; instead make the “end game” part of your overall operating strategy
SEPT 2013
Business Exit & Succession Planning Committee

8. Why exit planning? (Cont’d)
Ingredients of a Successful Exit Plan:
A written Exit Plan based on the owner’s objectives
An experienced team of advisors to design and implement the plan
Cash flow and a quantified business value
A strong management team in place
Time
SEPT 2013
Business Exit & Succession Planning Committee

9. WHY EXIT planning? (Cont’d)
Most business owners spend more time planning a family vacation than how to exit from their business
This is not due to a lack of desire or intelligence. It is simply because they don’t know how or where to begin
The vast majority of owners are unaware there is a specific planning and implementation process that can help ensure they achieve their objectives
SEPT 2013
Business Exit & Succession Planning Committee

10. Why the cpa’s role is critical
Can help document the overall processes
Coordinates other outside advisers (legal, estate, asset managers, etc.)
Provides a very objective viewpoint
Inner Sanctum Access- you are the “trusted advisor”; you should be a critical piece of the Succession and Exit Planning Process
CAPABLE OF “OWNING”
Has good feel for leadership style of potential successor; can bridge the generations (and keep the client)
Will be more company versus personality/ family member focused
Knows the business and the numbers

11. Succession Planning process
Seven step documented process to achieve successful transfer from Current Management (CM) to Successor Management (SM):
Determine how the succession planning process will work including a communication plan
Consider the view of the CM including objectives, timing and personal matters
Determine the financial needs of the CM who is retiring and the viability of the business to support those needs
Consider the potential SM including capabilities, comfort with supervising former peers and role acceptance
Understand the role family members will play in the company including those outside the business and future family members
Maintain a process which provides for periodic reviews to determine viability of the Succession Plan including after the plan is in place and is being executed
Incorporate an appropriate methodology for transferring wealth in accordance with current shareholders’ desires
SEPT 2013
Business Exit & Succession Planning Committee

12. Business Exit & Succession Planning Committee
EXIT planning process
Identify owner exit objectives
Quantify business and personal financial resources and needs
Maximize and protect business values
Ownership transfer to third parties
Ownership transfer to insiders
Business continuity
Personal wealth and estate planning
SEPT 2013
Business Exit & Succession Planning Committee

13. Business Exit & Succession Planning Committee
NEXT steps?
Business Exit & Succession Planning involves many skillsets and capabilities; some of which just come from experience. The best and easiest thing to do is to join the Business Exit & Succession Planning Committee of the NYSSCPA. The purpose of this Committee is to educate CPA’s on these subjects.
If you are interested, please reach out to the Chairman, Bernie Leone or any committee member listed on the NYSSCPA website.
SEPT 2013
Business Exit & Succession Planning Committee

14. NYSSCPA Business Exit & Succession Planning Committee
NYSSCPA SEPT 2013