Running your own business is a rewarding experience. It can also be terrifying. The unknowns that come along with ownership are certainly nerve-wracking.
I first joined the world of entrepreneurship when I was a teenager. As a baseball collector during the 90’s, I saw the potential for entering the market of buying and selling cards. I was able to turn my passion into a thriving business.
Growing up in Freeport, Minnesota, I partnered with a friend from high school to open a small 300 square foot storefront. We were even featured in the local newspaper.
Our business model was simple – operate our store for locals and pay for a booth at the weekend tradeshows to gain exposure to buy/sell/trade cards to the attendees.
Expansion was always at the forefront of our minds and we recognized a particular opportunity to bypass paying for the local tradeshows to set up our own. We went big by paying a small fortune to have the first two females of hockey attend and sign autographs.
Our ambitious nature got the best of us when we were first introduced to the risks of operating a business. A competitor, who was running a tradeshow on the same day, sent in a fax, forging our signature to the tradeshow promotional magazine saying our show was cancelled. No one attended and we lost our entire investment.
That was the first day I was introduced to the risks associated with owning my own business which brought me down the path of helping other business owners reduce and mitigate their own risks by forming Insight Insurance Services.
As business owners, we are constantly getting pulled in different directions creating stress and sleepless nights. Yes, it is scary. But it is incredibly worthwhile.
We read and hear about stories all the time about well-known business leaders filing for divorce, becoming ill, or even death. The most recent and notable example is Jeff Bezos of Amazon. His $150 billion divorce dominated the news for several weeks.
While many were focused on the tabloid-related nature of the divorce, I see the incredible planning that went on behind the scenes leading up to the infamous tweets announcing the split. The entire process was as seamless as anyone in their respective camps could have hoped.
If this story sounds like a rarity, it’s not – specifically in family-owned businesses.
The Bezos’s split was a large-scale coordinated effort in preserving the operations and reputation of one of the largest companies in the world. Many family-owned businesses face similar situations but with vastly different outcomes.
Multiple variables complicate the succession planning process for family-owned businesses, including founder mortality, family ties, assumptions about the new leader. These factors seem overwhelming leading company leaders to delay or ignore succession planning.
Well-prepared business owners and their families have taken time to create a financial plan that meets their current and future needs. The benefits of thorough business succession planning includes:
- Maximize the value of your company
A company with higher revenues and which shows growing revenues will be more valuable and attractive to potential buyers.
- Minimize income tax liability
The Internal Revenue Code is set up to provide numerous tax breaks to businesses. Understanding the strategies to reduce taxable income legitimately and avoid pitfalls can be crucial in creating outstanding returns.
- Reduce risks
Every business carries some form of risk. For every risk, a system of controls needs to be implemented to reduce the amount of risk. Minimizing potential crisis effects ensures the efficient operations of a business.
- Increase probability of successful, efficient transition
Taking a long-term approach allows for a well-thought out transition. A gradual, multi process allows businesses to work through the complexities involved.
Relinquishing control of a business is an emotional process making business owners address their own mortality or inability to continue running a business they have spent years building. Proactive planning alleviates some of the stress, ensures the financial stability of your spouse and family, provides continuity of the operations, and protects your employees.
At the end of the day, being prepared is the most important factor. Establishing your goals early, understanding how cash flow plays into the equation, and being emotionally ready for the transition will help simplify the transition.
As a budding, teenage entrepreneur in the baseball card industry, I wish I had thought through my risks of business ownership. My passion for baseball cards and business growth aspirations clouded my judgement and paved the way for a lost investment and heartache. However, my past stumbles led me to creating Insight Insurance Services to advise business owners on risk reduction, maximizing value, and creating a successful path forward for business owners.
Please contact us with any questions.