Employee Ownership Transitions: Beyond ESOPs

As business owners explore strategies to exit their business and solidify their legacy, an employee ownership transition offers an alternative that lifts up a ready buyer and strengthens the business for years to come. In this webinar, Project Equity will introduce you to other forms of employee ownership beyond ESOPs, help you identify good candidates already within your portfolio and show you how offering this service will expand your reach.

Avoiding Common Pitfalls During the Sale of a Business

According to the Small Business Administration (SBA), 75% of small businesses fail to sell successfully. That’s right – 3 out of 4 small businesses are unable to sell. This is in large part due to a lack of tools and resources available to assist the business owner historically. As a result, millions of business owners are forced to continue trying to sell their businesses or shutting down, which is both expensive and time-consuming.

Preventing Problematic Phone Calls from Clients

Fri, 03/11/2022 - 09:58

Written by: JMongaras

 

We interviewed Bruce Willey CPA , JD, CExP, Tax Reduction and Business Coach with American Tax Planning, LLC, for this week’s BEI Member blog. Bruce’s passion is to provide simple solutions to client problems so they can fully understand what they are getting into. He focuses on minimizing taxes an creating additional working capital for his clients. Bruce guides business owners on making financial decisions that will ultimately lead them to accumulate more wealth outside of the businesses in a way that maximizes outcomes while minimizing risks.

Bruce is an attorney, has worked with a variety of family businesses in different ways, and has worked in the world of income tax for over 35 years.

Why did you decide to work with business owners to help them exit?

Bruce:

I believe that business owners work the hardest, risk the most, and are in need of the most support. I am fascinated by what constitutes a business, what they make, how they provide services, and what they do to improve the lives of their customers. Once established, the relationships I share with my clients are enjoyable, challenging, and loyal. The complex nature of their needs makes the work that I do so gratifying. I often find myself learning myself as I provide solutions to their opportunities and challenges.

Tell us about an unexpected challenge you have encountered working with business owners. How did it impact you or your practice and how did you overcome the problem?

Bruce:

The most frustrating hurdle I encounter is with the owner who calls after they have made a huge, life-altering decision. In these cases, they have already done something, sold something, or committed to a contract. Then, suddenly, they say to themselves, “I should have called Bruce before I made that decision.” Unfortunately, this often means that it is too late to resolve the problem at hand. The owner is often upset with the result of their decision because they didn’t understand all their options. I try to prevent this from happening by continually speaking with my clients, often reminding them of their options, to ensure I will not receive that unexpected phone call that my client has made a poor decision without my knowledge.

Contact us today to ensure you are your client's FIRST call. 

How has your involvement with BEI impacted your practice?

Bruce:

I have met a wonderful, giving group of professionals who are eager to help me wherever they can. It has deepened my bench so to speak because I have resources across different industries to help me solve problems as they arise. BEI is like a family in many ways. No one in the group is a competitor, there is more than enough support to go around, and the spirit of cooperation is the most wonderful benefit of being a part of BEI.

Do you have any advice for an advisor just starting out?

Bruce:

Listen to others. Speak with as many professionals as you can because you never know what their value may be to you down the road. Never be afraid to admit others may know more than you. Finally, it is far better to say, “I don’t know but I will find out,” as opposed to making something up just to provide an answer.

Do you have any recent accomplishments or contributions you want to share with our other members?

Bruce:

I am a frequent contributor of content to Entrepreneur and Kiplinger magazines and can be found speaking from time to time about how managing your tax situation is an untapped resource for business owners. Learn more about Bruce and his work here: www.americantbp.com.

Join the Waitlist for BEI's Associate Membership

If you are interested in joining Bruce in the BEI family, consisting of over 25,000 advisors worldwide, contact us today! We’ll talk about the best option for you and walk you through all the steps you need to ensure you are on the path to becoming your client’s most Trusted Advisor.

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Eight Questions to Ask Your Client Before Their Child Takes Over the Business

Fri, 12/10/2021 - 08:00

Written by: JMongaras

Someday, perhaps soon, your client will want to step down as the leader of the family business. If they are like many parents who lead a family business, they have probably always dreamed that one of their children would pick up the reins when they didn’t want to lead anymore.  

Unfortunately, succession in a family business is not always as simple as these clients would hope. Taking the time to gather information from your client early in the Exit Planning Process will save your time and their money in the long run. Therefore, before your client hands the family business off to a child, there are eight questions that you should ask your client, to make sure they are ready to pass on their business to their child. 

Is running a business the right choice for your next generation? 

This first question is so important. Ask your client to reflect critically on their time in the business. Was it a happy part of their life? Is this type of work what they want to encourage their children to pursue? If your answer is yes, it’s time to have an open conversation with the next generation about running the family business. 

What has this person the chosen successor said about running the family business before? 

In their conversations with their child about the family business, what has the child said throughout their life about running the family business? If the child had always been disinterested and has suddenly changed their mind, explore that decision with them.  

Make sure that the child does not feel obligated to take on this responsibility because this will only lead to more conflict in the long run. 

Is Owner the right role? 

As they talk to their child about the business, ask your client to figure out where the child would best fit into the business. Don’t assume that they will want to lead the business before talking to them about all their options. Many people want to take a back seat role, so they can focus more on their own family.  

Are there other relatives who are more interested? 

If the child is not interested in taking over as an owner, or is not interested in the business at all, that does not necessarily mean that your client must sell to a third party. Many nieces and nephews are fantastic at running the family business could also be a good candidate to take over the family business, and that power transition can be quite comfortable for some families. Don’t be afraid to think creatively about succession planning if your client insists on keeping the business within the family. 

Does this person understand the values the business was founded on? 

Often, conflicts within family businesses come when different generations have different ideas of what the business should value. For example, perhaps the older generation was more focused on the bottom line, and the younger generation is more interested in communication and customer engagement. Before your client passes on the family business, make sure they have a conversation with their child about the values that the business was founded on. If it’s important to keep those things values intact with the next owner, a different exit path may need to be explored. 

If you set aside your view of what the business should be, could you see a way the business could grow under this person? 

The new generation having a different view of how a business will succeed is not always a bad thing. Often, when there is a disconnect between generational values in a family business, it is because the younger generation has a better sense of what people need from the business today or have ideas for innovation that their parents just couldn’t see may not have ever thought of.  

This is often difficult for a patriarch or matriarch to handle because they want to believe that the business will stay the same in their child’s hands. However, it is important to ask your client, “what could your child bring to this business if you got out of the way?” 

How well will you work together during the transition? 

Even if the generations agree on the values and direction of the business, the transition can still be difficult. We all know that the best leadership transitions are gradual, so with that in mind, how well can your client work with their child during the transition? 

Will your business relationship jeopardize your personal relationship? 

Running a business together and transitioning power from one generation to the next can often put a strain on personal relationships. Therefore, for this transition to be successful, both your client and their child need to be able to set aside their personal relationship during business hours and set aside business conversations at family gatherings. If they feel that they can do that, you are on the right track. 

As you create an Exit Plan for your client, there are many things that you need to talk to your client about, but by far the most important thing you should remind your client of is: how their child feels about the business is not how they feel about their parent. If the child is interested in running the business, a parent can create a transition plan that works for everyone, and if they aren’t, that is alright too. 

If you are interested in learning more about how to manage your clients’ Exit Plans and a process to ensure all their goals are met, check out our upcoming Exit Planning Boot Camp

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ESOPs as an Exit Path

On this episode of Tales from the Trenches, Ben Wells and Jim Carlisle dive into ESOPs; detailing different ways to structure an ESOP, the tax advantages of an ESOP, educating clients on ESOPs as a possible exit path, and how advisors can approach the ESOP conversation with their clients.

What to Consider When Selling Your Company to Your Children

From our findings, about two-thirds of Exit Plans result in inside transfers as opposed to a third-party sale. We believe the reason for this is simply a lack of knowledge of ownership transfer options. In this episode of Why We Plan, John Brown, Founder of BEI, and Elizabeth Mower, President of BEI, discuss their personal experiences working with business owners that primarily sell to their business-active children simply because they are unaware of any other options.