SUCCESSION PLANNING
If you were to ask a group of your peers "when does succession planning start", very few might suggest that it should have happened yesterday. Succession planning is often tagged "estate planning" and this is then closely associated with death which few like to plan or discuss.
Really though, succession or estate planning is about preserving the wealth that has accumulated over ones lifetime, and passing that wealth on to the future generations.
In a business scenario the start point for the planning is very defined — at the date the business started operating. The wise business person is the one who is planning the exit strategy at the time they are setting up the business — it is part of the business plan. Likely it is not highly refined but the basic thought of exit has been entertained and it does have some impact or the business operation structure. Generally the more often the person has been involved in operation of a business the greater the priority of the planning of the exit strategy at the time the business operation are about to start.
The Start
So where does one start from. First there is the key rule — set realistic goals and values — the value of any item is its market value — that is what someone else will pay for it at the time of sale. Planning is based on fair values, not the book value of the cost. Similarly goals are realistic goals that will likely be achieved given the abilities and the aptitudes of the persons involved. At the same time do not undersell yourself — how often have we heard the expression 'we are our own worst enemy'. Why &mdash' because we stress our faults and don not give proper credit for our abilities.
Running
As with everything that you do, put the best team around you that you can afford and keep in ongoing contact with them so they will be aware of what you are doing at all times. I am not a doctor, so when I am not well I go to the clinic for their expertise and opinions. Likewise my car goes to the garage when it has to be repaired. Then when my body is not well I know I can travel to the clinic to obtain the assistance to get better.
The same applies to the operation of your financial engine — it is the basis for the your being able to pursue the standards of the lifestyle that you desire. Not keeping it in tune will lead to potentially not reaching the lifestyle you desire or may be able to potentially have.
The Competitors
Successful Entrepreneur — the individual who is the significant shareholder in a high-valued incorporated business — the person who has a high net worth often funded through the cash flow operations of the business and has funds well in excess of the needs for personal and living expenses.
Fledgling Entrepreneur — the individual who has the majority of their assets tied up in the operations of the business — the assets are tied up for business-related financing.
Large-Scale Investor— the person who has high net worth, either inherited or derived from the sale of the a business or other investments. Executive — the person who has a high salary and a great compensation package and whose assets are generally focused or personal residences, RRSP's and deferred income plans. Unincorporated Professional — like the executive however the value is in the worth of the professional practice that the person has developed.
Salaried Employee — lowered salary but may have value accumulated thorough their home, pensions and investments.
Retiree or Other Small Scale Investor — the person who is concerned about being able to meet current expenses and who is concerned about bequests to surviving family members particularly the spouse.
Deceased — included because in the year of death there is a number of maneuvers within the first year of the estate.
The Uniforms
All are different — why? Each person is different and each has a unique plan that applies to them. This is the nature of the Success / Estate plan — there is no fit that applies to everyone — each is tailored and made to fit for the individual. As the person changes so to must their plan (uniform).
The Finish
As the plan comes together and the transfer of the assets / wealth is made then completion and satisfaction of the individual's wishes are realized.
So How Do You Get In The Race?
We need you to put together (and this may not be easy!!)
- Full disclosure of all of your assets and the liabilities and their fair values
- Full disclosure of your needs — both personally and for what you wish for your family — this will also require an honest assessment of their situations and goals
- Full disclosure of any existing succession plans that have already been made.