10-Step Succession Planning Checklist for Business Owners

Spokane Succession Planning for Business Owners

Q: Is there a process for succession planning in Spokane? In the past you’ve written a lot about succession planning; now you seem very focused on estate planning. So, which am I looking for and how do I tell someone what I need help with?

A: Most people mistakenly assume that succession planning and estate planning are one and the same. Though closely related, and often overlapping, estate and succession planning address similar objectives, but from different perspectives.

Estate Planning

In the simplest terms, estate planning addresses the contingencies of an owner dying too soon. Estate planning focuses on minimizing exposure to the estate tax, passing estate assets to the heirs of your choosing, and providing financial security for those you will leave behind.

Succession Planning

Spokane succession planning focuses on living benefits, establishing a smooth ownership transition, providing retirement options, and preparing the next generation to lead. Succession planning is about passing the operation to the next generation as a going concern during the owner’s lifetime, determining a sound management structure, minimizing transfer costs, and mitigating tax consequences.

Importance of Checklists

Several years ago, I developed a by the numbers checklist for planning that I follow, and continue to recommend today. As a pilot, I utilize a preflight checklist before every flight. That checklist is designed to keep me safe and ensure all systems are go before takeoff. Like the preflight checklist, planning by the numbers makes sure you address all the elements of a comprehensive plan and don’t miss what otherwise may be a costly oversight. Checklists are critical to consistent performance. Pilots, medical care providers, manufacturing plant managers, and train engineers use checklists. Checklists improve efficiency and effectiveness.

10-Step Spokane Succession Planning Checklist for Business Owners

The 10-step planning checklist I follow begins by asking you to identify your planning objectives. What do you want to accomplish for each facet of the plan? And, how will you, your family, and the operation benefit when you’ve achieved those objectives? So, begin by clearly identifying your objectives:

1. Define clear objectives for:

  • Financial Security
  • Ownership Transition
  • Leadership Structure
  • Estate Plan and Contingency Obligation

Then evaluate your financial condition, where are you now and what you can do to improve your situation?

2. Evaluate [your] current financial situation and establish a benchmark for financial security.
Given the findings in #2 and using common resources, what can you do to improve your overall financial security?

3. Align brokerage investments, retirement plans, and life insurance policies to help achieve financial security.

4. Strategize the best options for equitably and efficiently transitioning land, operations, and investments to the next generation.

5. Draft [or refine existing] estate planning documents, operating agreements, buy-sell provisions, land leases, etc. to protect and transition land and operations to the next generation.
Steps 6 and 7 address many of the emotional and sometimes difficult matters around family business. There aren’t legal requirements in this phase, so these issues are often procrastinated until they fade in importance. But, unaddressed these matters may spell doom for a family operation.

6. Review and recommend written policy statements, including family employment policy, ownership restrictions, family governance, etc.

7. Review and recommend a defined management structure, including written job descriptions, compensation schedules, performance reviews, and professional development programs.
Finally, you should make sure the plan you’re establishing provides for your dependents, especially in the case of your premature death or disability.

8. Create [or refine existing] contingency plans for dependents and key persons.

9. [additional concerns]

10. Commit to communicate plans to all involved and interested family members, loyal employees, etc.

The Succession Planning Experts in Spokane

Feel free to contact me If you’d like a copy of the checklist.

Kevin Spafford, CFP®, helps farming professionals and family business owners plan for succession. Legacy-by-Design.com has numerous planning resources. Kevin is available at 530-671-2100 or Kevin@Legacy-by-Design.com.