How your priorities pivot after leaving Leaving a business you’ve built from the ground up is never easy. As noted by the Harvard Business Review (HBR), this transition often comes with emotional fallout. While you’ve achieved the goal of running a successful business, making a great sale and, hopefully, leaving the company in the hands of someone who cares about what comes next, you’re also in an entirely new position. What do you do with your time? What are your plans for the immediate future? For the long term? To help navigate this pivoting of priorities, think about what succession means for you, rather than the business itself. The HBR piece recommends creating a six-month game plan for the immediate aftermath of selling your business that includes specific goals. For example, you might decide to take a long vacation, learn a new skill or tackle a long-overdue project around your home. In practice, it doesn’t matter what you choose—the first few months post-sale are all about finding out who you are without your business, and what you want moving forward. For many business owners, this time lets them rediscover what they’re passionate about. For some, it’s community revitalization projects. For others, it’s scholarship funds or support for the arts. Whatever your philanthropic intent, it’s worth working with a team of advisors to help draft a clear statement of intent. Is your plan to make regular donations? To create a family foundation? To play an active role in the charity or group itself? Depending on which framework best meets your new priorities, you’ll need different legacy structures. Simple donations can be scheduled as needed, while
firm. What happens if the buyers abruptly drop the value of their offer, or start stonewalling on specific conditions? What if they have a team of lawyers at their disposal, requesting meeting after meeting and document after document? If you’re still running
family resistance. It took a year of infighting and litigation before the dust settled: Wallace was out of the company and he didn’t reconcile with Harrison for decades. The same can happen to any business when family dynamics come into play. Some family members may be hoping to take over the business, while others want a larger role but not all the responsibility of ownership. Some see the value in holding the company as an asset, and others want to see a total sale with the proceeds distributed evenly. As a result, it’s worth partnering with legacy professionals to help evaluate your options and determine what works best for your family. For example, you might decide to create a trust that allows your children or grandchildren to access funds for specific purposes. But creating an effective trust is complicated. Too broad
your business, it’s easy to get overwhelmed by the details and make a mistake that negatively impacts your legacy. Backed by a team of trusted business advisors, you’re in a better position to ensure you get the value you deserve for your company, in turn laying the foundation for a long-term legacy. By letting experts in the field handle the
Backed by a team of trusted business advisors, you’re in a better position to ensure you get the value you deserve for your company.
Creating a detailed statement of wealth transfer intent with the advice of industry experts can help streamline the process of succession planning and reduce the risk of family infighting over assets.
back-and-forth between buyers, investors and even family members, you can reduce the stress of selling your business, while you focus on what matters: determining exactly what you want your legacy to look like. But this is just the beginning. Once the ink is dry and the deal is done, the real work begins. How cash flow shifts after selling When your business is operational, the cash flows from the company itself. Some owners choose to pay themselves a salary, while others leverage the revenue of the company where and when they need it. When it comes to your legacy, meanwhile, cash flow shifts significantly. Instead of taking a steady salary or having access to cash based on sales over time, the sale of your business often provides you with substantial amounts of cash—but only once. As a result, your cash-flow function changes. Simply taking the money from your sale and
the creation of a foundation requires a more robust effort to determine who can make distribution decisions. Is it just you and your spouse? Your children? Their children? More extended family? Trusted experts in your corner can help design funding and distribution structures that help your legacy thrive over the long term. How family dynamics fluctuate after succession As mentioned in both part one and part two of our post-pandemic succession series, one of the most challenging aspects of selling your business is navigating family dynamics. Consider a situation in which two of three children want to be involved with the business moving forward, but the third does not. Should the third be bought out despite their lack of interest or not? These kinds of questions can cause significant family strife, especially if family members feel they’re not being fairly treated. This isn’t simply a thought exercise. As noted by Inc., family business, McCain Foods experienced a massive shakeup in 1993 when succession planning started. Originally founded by brothers Harrison and Wallace McCain (who were also co-CEOs) in 1957, the company sold the world’s first frozen French fries and went on to land contracts with fast-food giant McDonald’s. Everything was going to plan until 1993, when Wallace pushed for his son to become CEO despite
and family members may rely on trust-fund distributions rather than finding their own path to financial security. Too narrow and it becomes almost impossible for family members to access money when they need it. Creating and articulating a detailed and in-depth statement of wealth transfer intent with the advice
of industry experts can help streamline the process of succession planning and reduce the risk of family infighting over assets. How a team of trusted advisors can help manage everything that comes after There are two components to a successful succession-planning partnership: expertise and trust. At California Bank & Trust, expertise runs deep. Our credentialed team of advisers can help you develop a wealth management plan that’s customized to meet your legacy objectives, risk tolerances and both your short- and long-term financing needs. We also know the value of trust. We’re committed to building relationships with clients that last decades.
putting it into a bank account won’t be enough to provide for your legacy over time, while overzealous investing could leave you facing unexpected losses. To help manage your new cash-flow framework, it’s worth connecting with an experienced trustee who can help you find the balance between spending, saving and leaving the legacy you want for your family.
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IN YOUR CORNER ISSUE 15 | 2023
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