Business Guidance

NOW is the Time to Consider Your Business Succession Plan

Given the recent economic uncertainty, many business owners need to consider their financial and succession plans. The COVID-19 pandemic has forced business owners to rethink how they can safely and successfully navigate through unchartered economic waters. Business owners nearing their retirement years may not be interested in going through an economic recovery period that could potentially span many years. This makes it even more timely to assess the succession plan for your business.

Older business owners are at higher risk in more ways than one. More than half of America’s small business owners are older than 50. Not only are they at a higher risk for health issues, the economic impact of the coronavirus could also be putting their retirement in jeopardy. It can be difficult to decide whether to retire and let the next generation handle business responsibilities, or to continue working in an attempt to put more earnings toward a future retirement.

If you are considering retirement due to the current pandemic and economic uncertainty, speak to your legal and financial professionals about your options for maximizing financial benefits. If you are able to take some time, you should begin building your succession plan at least five years before you want to retire. Here are some key things to consider:

Getting Started

  • Evaluate what you, as an owner, want from the transition: financial goals for retirement, philanthropy, estate planning, how to spend your time
  • Evaluate how your family fits (or doesn’t fit) into succession planning
  • Identify key employees and their ongoing role with the business

Prepare the Business for Transition & Build Value in Your Business

  • Establish strong corporate governance which includes the formation of a board, mission statement and strategic planning
  • Establish incentives for key employees and family members (professional growth, deferred compensation, voting and/or non-voting stock, etc.)
  • Enhance the financial strength of the company by building the balance sheet and income statement, diversifying the customer base, and distinguishing the business from competition

The Transition

  • If the next generation family members are taking control, it is important to establish the management team and determine the method of funding: gifting, bonus stock, deferred payments, etc.
  • If key employees are taking control, it is important to understand the financial viability for the purchase and what the buyers’ resources are to determine the method of funding: lump sum, seller take back note, bonuses over time, consulting contract for owner, traditional bank financing, etc.
  • Employee ownership through an employee stock ownership plan (ESOP) may make sense for your company after consultation with your legal and financial professionals.
  • If the company will be sold to an unrelated third-party, the owner can utilize a broker or leverage relationships with key competitors and/or vendors.

There is no “one size fits all” approach when developing a succession plan for your business so it is important to seek advice from a full team of financial, tax and legal advisors to make sure you are following the right roadmap. Not sure where to start? Univest is here to help you navigate the process and chart the right course for your company’s future. Contact us to have a conversation about creating the succession plan your company deserves.


Univest Bank and Trust Co. is Member FDIC