It’s been said that dreaming is a form of planning. Although it’s nice to dream about success, that philosophy doesn’t necessarily apply when it comes to something as important as the longevity or profitability of your business. If you’re like most business owners, your business is something you’ve worked hard to start, sustain, and build. If you’re just starting out, developing a business plan and a robust succession plan should be on your list of things to accomplish. However, if you didn’t start off with a business plan, having one while building your business can be just as important. Furthermore, when potential retirement is nearing, it’s a good idea to consider the future and a potential exit strategy.

“Having a solid business plan helps potential investors and financial providers realize your short and long-term goals,” said David Frederick, J.D., LL.M., and the Director of Wealth Planning at First Bank Wealth Management. “It’s a critical tool for enlisting others, like partners and your bank, to join in the cause for your business to succeed.”

Frederick continued to explain that a business succession plan allows business owners to face unexpected circumstances with confidence and certainty. “For instance, a closely-held business may rely on a key shareholder or a key employee for its operations. A life insurance policy on the life of the key figure and benefiting the business—known as a keyman insurance policy—is a common element of a business succession plan,” he said, “and may help the business survive if a key figure dies unexpectedly.”

What Are Other Key Benefits of a Solid Business and Succession Plan?

Taxation Strategies.

“A business plan may help lower taxes,” said Frederick. “When a business owner is ready to retire and either sell the business or pass it on to the next generation, the government is often waiting in the wings to tax the transaction. With effective planning, the business owner may be able to exit the business and pay far less, in some cases nothing, in taxes.”

According to a 2016 Family Business Survey, nearly half of family business owners, or 43 percent, have no succession plan in place. Frederick added, “I always advise my clients to have a solid succession plan in place approximately five to seven years prior to their intended retirement age.”

For structures and strategies to transfer economic benefit and control of a family business to the next generation while reducing potential taxation, read: Structures and Strategies: Family Business Succession Planning.

Partnership Resolutions.

Business partners may come into conflict when determining the future of the business.

What happens when one partner wants to go left and the other partner wants to go right? “With an effective business plan,” explained Frederick, “disputes between partners can be resolved with set structures and mediating measures written into the plan itself. Without a business plan, it may be a judge who resolves the dispute.”

Business owners choose their partners carefully. “But if one of the business partners faces an unexpected circumstance, such as bankruptcy, divorce, or death,” he said, “the business owner may find himself in business with his old partner’s creditors, ex-spouse, or heirs.” An effective business plan helps keep control of the business even when unexpected circumstances may take part of it away.

One of the keys to a successful business is solidifying the right partnerships but it is also about having the right documents in place. Read Don’t Want to End Up in Business with a Total Stranger? Have the Right Documents in Place.

Why Choose a Business Plan?

As a partner to family businesses and other closely-held businesses, First Bank wants to see these businesses succeed. An effective business plan helps businesses face the unexpected, minimize tax, maintain control, and generally paves the way for success. “At First Bank, we make every effort to support our partners in business,” said Frederick, “including helping them plan for the future.”

Regardless of where you’re at in the lifecycle of your business, planning ahead with a solid business plan and succession plan for the future is always advisable. Let the trusted advisors at First Bank and First Bank Wealth Management help prepare you for what’s next.

David Frederick, J.D., LL.M. is the Director of Wealth Planning at First Bank Wealth Management and Adjunct Professor of Economics at Washington University. David may be reached at 314-995-8764 or via email at