When Your Passion Fades – Issues in Business Succession
April 21, 2009
Additional Points When Winding Up Your Business
1) Craft a written plan. In the plan, list everyone you do business with and everyone who cares about the future of the business. You then need to decide – who has to know, what do they need to know, when do they need to know it. Before you tell anyone, you need to calculate the impact of shutting down on your personal financial situation.
2) Unless your net business debts are very small so that they can be covered by the sale of existing assets, and there are no contingency liabilities, never just walk away.
3) If closing down, it is better to sell it as a business or to sell the assets? Is it better sold all together, or as parts?
4) Look for buyers for all of and/or parts of your business that might be attractive to other businesses. Do this BEFORE announcing you are winding down or you could have a “run” on what business remains. Do no overlook your employees as potential buyers for some, or all of, your business. Get input from a legitimate investment banker and/or business broker. Real estate brokers generally do not specialize in selling businesses and do not have experience in the nuances of selling a business. By all means, if selling real estate, use a real estate broker.
5) Contingent liabilities include items such as: unexpired leases (both real estate and equipment, making sure that if the leases are assignable that all personal guarantees are assignable as well. In the case of real estate, do the premises require restoration to a “move in” condition before selling or terminating the lease? Are there obligations to employees, etc., that may not be obvious?
6) Assets should be converted to cash at “fair market value.” Do not give favorable prices to friends and family as an attorney for a creditor could construe that sale as a “fraudulent conveyance,” opening you up to more liability and legal process.
7) Work with your advisors, succession planner, attorney and accountant to make sure you notify taxing authorities, comply with all regulations and notify other interested parties, including utilities and telephone providers. Get receipts and written proof that all filings have been made, all taxes paid and that you have a receipt for all other payments. Any tax liabilities left unpaid will become the responsibility of the owners. Such obligations cannot be discharged through bankruptcy.
8) Set a date for final cessation of your orderly liquidation.
9) Check with a records management specialist to identify what records must be retained (personally by the shareholders/owners), and what records can be destroyed. Provision should also be made to wipe all hard drives on your computers (prior to transfer to new owners). Company IP must be protected and/or sold, if saleable. Make sure to shred and dispose of all records that can be destroyed.
for part one of this series click here:
http://cli.gs/Z8tBnp Testing Your Passion – A Leader’s Responsibilities, part 1
For part two of this series click here: http://cli.gs/n7Mq07 Crafting your Business Succession Plan – My top 18 Tips
© 2005, 2009 By John J. Reddish, CMC
Testing Your Passion – A Leader’s Responsibilities
April 21, 2009
A leader (who is often the primary owner or stakeholder) of the businesses, or organization, is responsible to see that the business is treated as an investment, both in terms of time and money commitments. There may be paid managers and staff to perform some or even all of the day-to-day tasks, but ensuring an adequate return on investment (blood, sweat and money) is the leader’s responsibility.
There are two components of an adequate return: time invested must be compensated through salary, benefits and perks; AND, money invested must be guaranteed a fair rate of return plus a premium for the level of risk assumed. Adequate returns do not just happen, they are achieved through planning and action. This commitment involves setting realistic, quantifiable goals; taking the steps necessary to attain the goals; measuring the results; and, adapting along the way.
The leader is responsible to ensure that the business invested in has a real business or community (if a non-profit) purpose. This means: being realistic about not throwing good money after bad; separating real, business activity from ego gratification; and assuring at least a baseline of security by taking prudent risks.
The leader is responsible to the people who work in the business. This involves: establishing organizational goals; providing direction about employees’ responsibilities in meeting these goals; setting standards of performance; and providing job performance feedback. This organized approach frees employees to perform effectively because it assures them that their positions are not held capriciously at the whim of the leader and that their paychecks are not constantly in jeopardy. This approach also facilitates identifying organizational successes and potential roadblocks. In a world of rapid change, a little perceived security goes a long way.
Finally, the leader is responsible to him- or herself, family and other stakeholders to do succession planning. Timely, thorough succession planning can facilitate a smooth transition when the leader determines that: the business is no longer viable; s/he has personally had enough of it; or, it has just become time to step aside.
If you have truly lost your passion, it’s time to go. Following are steps to take to protect yourself and your estate as you go.
Check out this earlier post for part 2 of this post “Your Walk Away Checklist:” http://www.thesuccessionplanner.com/exit-strategies/crafting-your-business-succession-plan-and-strategies-my-top-18-tips-to-your-successful-business-sale/2008/11
Part 3 of this post to come later in the week
© 2005, 2009 By John J. Reddish, CMC
