California Business - Volume 3, Issue 1 - Northern California - 15

BUSINESS
INSIDER

SUCCESSION PLANNING
How to transition your family business to the next generation

usiness succession is the one thing many companies fail to address for fear of relinquishing
control, a lack of time, the feeling that successors aren't ready or other reasons. But it's never
too early to start succession planning.
"Statistically, only 30 percent of family-owned businesses are effectively transferred to the second generation,
and just 10 percent make it to the third generation," says
Julianne Cruz, managing director of Advisory Services at
CB&T Wealth Management. "There are myriad reasons
for this, but one recurring issue is a lack of effective
succession planning."
Here are some insights from Cruz on succession
planning.
How should business owners get started?
You need to consider the three Ts of successful transition.
* Transferring management
* Transferring ownership
* Tax consequences
In all cases, having a plan that is strategic and well
executed is key, but that takes time. The most successful
transition plans take place over a number of years, as successors develop the skill sets required to run the business.
How is management transferred?
It's important to select independent advisers who are
highly experienced with planning issues to arrive at the
best plan for you, your family and your business.

Some areas to consider: If more than one child is involved, how will contentious decisions be made once you
exit the business? If you want certain key loyal employees
to be cared for, as they are likely necessary for a smooth
transition, what assurances do you have that this will happen? What happens if unexpected health issues force the
transition early?
A well-developed plan ensures the business will thrive
without interruptions, helps the next generation grow
into their roles at a reasonable pace and promotes future
harmony among family members.
A short-term plan ensures that there's enough liquidity and funding to hire necessary experts and avoid a fire
sale. A mid-term plan prepares developing successors or
key employees to be in decision-making roles. It also has a
timeline for family members to step in to their new roles
with certain targets. The long-term plan is ultimately what
you want to happen - the best of all circumstances.
What other factors should be considered in
transferring ownership?
Your retirement plan should be thoroughly integrated
into this process. How much income will be needed, and
what's the timeline? If you need income from the business, are you willing to bear the investment risk of the
business as a source of income once you're not involved?
There are also estate-planning and tax issues. Are all
your children involved in the business? If not, do you
desire to ensure each child will ultimately receive an equal
estate share? Will ownership transfers be
made in a tax efficient manner? *
Julianne Cruz is managing director, Advisory
Services, for CB&T Wealth Management.
Contact her at (310) 258-9301 or julianne.
cruz@contangoadvisors.com.
Wealth management services are offered through Zions
Capital Advisors, Inc., which operates as CB&T Wealth
Management in California. Zions Capital Advisors is a registered investment adviser, a nonbank affiliate of California
Bank & Trust and a nonbank subsidiary of Zions Bancorporation. Some representatives of CB&T Wealth Management
are also registered representatives of Zions Direct, which
is a member of FINRA/SIPC and a nonbank subsidiary of
Zions Bank. Employees of Zions Capital Advisors are shared
employees of Zions Trust, a subsidiary of Zions Bank.
#CCA0813-0090

California Business * 15

California Business - Volume 3, Issue 1 - Northern California

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