Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

Have you thought about succession planning and the options you have?

quiz, expertise, government accountingNo matter how long you avoid the succession planning discussion, you will exit the company one way or another. The worst-case scenario. The company ends up in probate court as a part of your estate. Best-case scenario. You contemplate all your options and decide what works best for you and your family so the next chapter of your life is enjoyable.

Don’t miss succession planning v exit planning:  What’s the difference?

The following is a list of succession plans we see the most:

  1. Your children purchase the business from you.
  2. You gift your interest in the business to your children.
  3. You gift or sell (or some combination of both) your interest in the business to a vanilla entity that all your children own equally.
  4. Your key employees buy your interest in the company.
  5. You form an Employee Stock Ownership Plan Trust to purchase your interest and your employees would own stock indirectly.
  6. You sell your business to a competitor.
  7. You sell your business to an outside investor looking to purchase a business like yours.
  8. You sell to a private equity group looking to make investments in your industry.
  9. You cease operations and close.
  10. You pass away without any plan and let the next generation worry about it.

Now, I agree, #9 and #10 are not the options anyone wants, but you would be surprised how often #9 and #10 occur. Concerning the other options listed above, there are many factors to consider in your planning. For example, do your children even have a desire to be involved in the company?

Learn more: Buy-Sell agreement horror stories

Lastly, my advice to business owners looking to exit their company in the next five years is to start today by speaking with their legal, accounting and financial planning advisors to ensure all vested individuals and professionals are on the same page. For example, the financial planning advisor has insight regarding the after-tax, lump-sum payment required to be invested today, that will allow you to enjoy your retirement.

For more information on how you can use gifting as part of your succession plan, click here!

Do you still have any questions? Feel free to contact Henry+Horne’s litigation + valuation professionals, who help clients in a variety of industries including construction, dealerships, restaurants, technology and more.


Mike Metzler, CMA, CGMA, ASA