Succession

“Succession is the challenge most likely to make or break a family company”

 
– Gordon Pitts, author of In the Blood


The Right Questions

How long am I going to work?

When am I leaving the business?

How much income stream do I need?

How much is my business worth?

How can I increase value?

How can I maximize cash and
reduce risk at exit?

What do I want to do with my life?

Management Succession

Often overlooked, but critical, management succession involves:

  • Successor’s commitment to run the business
  • Strategic plan – particularly vision & key results
  • Organization structure
  • Management team
  • Board of directors and governance
  • Timelines

  • Reducing key person dependency
  • Compensation matters
  • Develop people – need to identify possible successors throughout, determine development gaps, and groom successors
  • Bridge successor
  • Identify succession obstacles


Rice & Associates role towards management succession includes finding out needs/wants of various parties, and assist in areas that need to get done.

Ownership Succession

All owners will exit their businesses. Owners need to prepare for and protect against crisis/untimely exit. Owners also should plan to increase value, maximize cash, reduce tax, reduce risk, and better ensure business & family continuity at a timely exit.

Timely/Orderly exit options include:

  • Retain ownership – with successor management
  • Gifting – outright; or with deferred compensation, family limited partnerships, annuities, consulting, or similar concepts, which:
    – Transfer non-controlling ownership to children or others
    – Allow owners (often parents) to retain control for some time
    – Provide owners a post-retirement income stream
    – Legitimately provide tax advantages – enable successor to pay for business in pre-tax dollars (as does leveraged debt)
  • Sell – to outside, family, or employees (co-owners, management, or ESOP)
  • Liquidate

Towards ownership succession, Rice & Associates acts as
a confidant to owners – getting owners to address “think
about” questions and bring clarity to their objectives, and
also finds out needs and wants of various parties.

After determining what needs to get done, Rice &
Associates coordinates and works together with legal and
other specialists towards valuation objectives & valuation
itself; business continuity, including control, buy/sell
agreement, and life insurance; stock classes and transfers;
net present value of deferred compensation or similar
concepts; decision rights; family harmony, legacy, vision,
values, goals, and family policies; and relating ownership
succession matters. Rice & Associates also directly assists in
a business sale.