Decision Vision

A Podcast
for Decision Makers

Episode 32

Do I Need a
Succession Plan?

 

Episode 32: Do I Need a Succession Plan?

“All of us will exit, voluntarily or not.” Words to ponder from “Decision Vision” host Mike Blake’s conversation with Bruce Gaynes, Kitchens Kelley Gaynes P.C. What are the three most important aspects of a succession plan? What are the different options I should consider in planning for the next steps in my business? These questions and more are addressed in this “Decision Vision” interview, presented by Brady Ware & Company.

Bruce Gaynes, Kitchens Kelley Gaynes P.C.

Bruce Gaynes, a founding shareholder of Kitchens Kelley Gaynes P.C., has over 35 years of experience helping clients. Prior to practicing law, he worked in the tax department of a national accounting firm and became a Certified Public Accountant. His law practice focuses on corporate, estate planning and tax matters.

Bruce’s work involves all sizes and forms of entities. He handles matters concerning the full business life cycle, beginning with organizational structuring and formation. As business and professional practices develop and grow, Bruce helps them properly document and protect themselves, in ways such as operating agreements and shareholder agreements, with independent contractor agreements, employment contracts, and non-disclosure agreements, and with other commercial transaction agreements. As clients look for exit strategies Bruce negotiates merger and acquisition documents, advises families on gifting techniques, formulates reorganization strategies, and spearheads family and tax planning.

As part of his work for business owners, executives, and professionals, Bruce maintains an estate planning practice, counseling individuals and families in their tax-reduction and asset-transfer strategies. As a consequence of his involvement in trust and estate law, Bruce also has extensive experience helping clients with probate matters.

Kitchens Kelley Gaynes, P.C. has been providing experienced legal representation for clients in virtually all areas of industry and commerce since 1985. We work closely with our clients to form long-term relationships based on top quality work and realistic legal advice. Our clients trust us to listen to them, understand their businesses and craft reliable legal strategies that will help them achieve their goals. Every client, no matter the size, receives the same quick, efficient and effective response.

For more information on the firm, go to their website, or you can call Bruce directly at (404) 467-7526.

Decision Vision Podcast Episode 32 | Do I Need a Succession Plan? | Bruce Gaynes | Brady Ware

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Transcript: Do I Need a Succession Plan? - Episode 32

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Intro:
Welcome to Decision Vision, a podcast series focusing on critical business decisions, brought to you by Brady Ware & Company. Brady Ware is a regional, full-service accounting and advisory firm that helps businesses and entrepreneurs make vision a reality.

Michael Blake:
And welcome to Decision Vision, a podcast giving you, the listener, clear vision to make great decisions. In each episode, we discuss the process of decision making on a different topic. But rather than making recommendations because everyone’s circumstances are different, we talk to subject matter experts for how they would recommend thinking about that decision.

Michael Blake:
My name is Mike Blake, and I’m your host for today’s program. I’m a Director at Brady Ware & Company, a full-service accounting firm based in Dayton, Ohio, with offices in Dayton; Columbus, Ohio; Richmond, Indiana; and Alpharetta, Georgia, which is where we are recording today. Brady Ware is sponsoring this podcast. If you like this podcast, please subscribe to your favorite podcast aggregator and please also consider leaving a review of the podcast as well.

Michael Blake:
So, our topic for today is, do I need a succession plan? And I’m intrigued by this topic for a number of reasons. One, as things have sort of worked out, I’m doing a lot of work in the succession planning area, and the dynastic wealth or intergenerational wealth preservation area, and developing strategies to to execute that, figuring out what works, what doesn’t, and helping families build governance around that, so that we don’t have the issues, the so-called shirtsleeves-to-shirtsleeves phenomenon where wealth made in one generation is typically gone by generation three. And in the podcast that was released in the week before, this one had Chris Demetree on talking about establishing a family office, which is one vehicle that is often used to do that.

Michael Blake:
And so, this is an area that I like to think that I’ve learned quite a bit about in the last few years I’ve been doing this. It’s also intriguing because I find it somewhat countercultural. We have, I think, in our society and our economy a a pro exit bias. And we talk with entrepreneurs, you talk to venture capitalists, you talk to people in business, and the goal is about exiting. How do I get out? How do we jump off the plane? How do I start to take my chips off the table, and retire, and have a boat that is so big that when people step on it, it does not move? And that’s fine, sort of, as far as it goes.

Michael Blake:
But I think it does kind of other options and injustice because there is no law out there that says that the only way to become wealthy and financially self-sufficient, financially independent, and financially impactful is to have an exit. In fact, and maybe there’s something else I’ll do in a podcast later, but there is significant empirical data that suggests that one of the worst things you can do to preserve family wealth over an extended period of time is exit.

Michael Blake:
And the reason for that is twofold. One is because, now, you’re liquid. So, it’s easier to do dumb things with your wealth because you can now spend it. And second is that when there’s no longer a family enterprise, there’s less of a reason for the family to be cohesive. It’s easier for everybody to kind of go off and do their own things. And you lose some of the the scale economy’s benefit of having that that wealth kind of amass and in one place. And when it comes to wealth, as some often is greater than the sum of its parts in terms of the impact that you can make. So, I think it’s important to have this voice out there that talks about the other options available other than simply exiting because you don’t necessarily need to do that.

Michael Blake:
And I’m not necessarily an expert, but I scratch my head for about two seconds. Then, I remembered a friend of mine who is an expert. And that friend of mine is Bruce Gaynes. And Bruce is a founding shareholder of Kitchens Kelley Gaynes, has over 40 years of experience helping clients, and before practicing law, worked in the tax department of a national accounting firm, and became a CPA. So, he’s your double threat. His law practice focuses on corporate, estate planning, and tax matters. His work involves all sizes and forms of entities. He handles matters concerning the full business lifecycle, beginning with organizational structuring and formation. As businesses and professional practices develop and grow, Bruce helps them properly document and protect themselves with the use of operating and shareholder agreements, independent contractor, and employment contracts, non-disclosure and non-compete agreements, and other documents. As clients look for exit strategies, Bruce negotiates merger and acquisition documents, advises families on gifting techniques, formulates reorganization strategies, and spearheads family and tax planning.

Michael Blake:
And I’ll add to that is that he is also the longtime host—I don’t know if he is the founder or not. We’ll ask him about that. He’s the host of the Succession Planning Group, which he’s been hosting in Buckhead for as long as I’ve known him, which has been over a decade, which involves a group of professionals that talk about not exiting, but actually the process of planning for succession and planning for enterprises to go beyond simply their founder or their direct descendants. As part of his work for business owners, executives, and professionals, Bruce maintains an estate planning practice counseling individuals and families in their tax reduction and asset transfer strategies. As a consequence of his involvement and trust and state law, Bruce has extensive experience helping clients with probate matters. Bruce, welcome to the program.

Bruce Gaynes:
Thank you very much.

Michael Blake:
So, Bruce, like I said, I’ve teed you up. You know, I think you’re about as knowledgeable about succession planning as certainly as anybody I know. So, let’s help people understand what that is. I have a vocabulary reset here or a vocabulary set. What is succession planning?

Bruce Gaynes:
Okay. Well, actually, let me say that at the outset that I think that I view the whole topic a little more broadly than you do because I look at this kind of planning as being alternative choices about do we, for instance, keep the company with insiders? And by the insiders, I mean people who are perhaps relatives or people who are not relatives but who are working inside the business, or do we have this go to outsiders? And that’s an important question, because all businesses or all all owners of businesses are going to exit at one point or another. They may do it voluntarily. They may do it involuntarily. And involuntarily might be going bankrupt. It might be just closing down the business because it’s—they’re tired of doing it. It might be just dying or becoming disabled. And so, they might leave, as they say, feet first.

Bruce Gaynes:
So, the role of of our law firm is to help our clients maintain control of what’s going to happen in their future. And some of that may involve disposing of the business in a way that’s perhaps more favorable to the owner, either because they are happy that they are keeping it within the family or keeping it within the employee group or because they are going to cash out and sell to a third party. Those are the two primary ways that businesses are disposed of in one fashion or another.

Bruce Gaynes:
And the other way that sometimes you see, it’s not very common, but there are also opportunities to go out of a business through an ESOP, an employee stock ownership plan. But that really requires a whole different set of circumstances. You absolutely have to have a bunch of people who are there, who can operate the business without you, which, sometimes, you have people who can be successful as long as the owner is there. Their ability to succeed going forward is dependent sometimes upon them having the proper direction or the proper knowledge. Furthermore, they’ve got to be able to run the business in a manner where cash flows enough, so that the ESPO works. And by the ESOP working, that means that that the ESOP is able to pay normally through a loan, pay for the purchase of the stock of the owner.

Michael Blake:
Okay, yeah. And that’s fair. And certainly, in fact, later today, we’re recording a podcast on exiting the business through a sale. But, you know, I mean, it’s my own personal opinion. I do think that the exit by sale is, sort of, the sexier, higher visibility kind of path, right? Everybody loves a good exit. Nobody really—nobody ever writes in The Wall Street Journal about, sort of, a peaceful transition of a business internally, right? But it’s important, obviously, sort of to have all those options on the table.

Bruce Gaynes:
Yes. And I think they all need to be considered together, and the same solution doesn’t work for all businesses. Every business is different, and the considerations are different. But the whole idea in putting together a succession plan is to evaluate. Make that evaluation of what’s the proper next step for the business. Put it down in writing in a written plan, and then to implement that plan. And normally, that’s something that takes place over time. And so, ideally we’d like to have at least a few years, some say maybe as many as five, but we want to be able to plan this out because not every business is ready for some form of disposition. Again, whether it’s internal or whether it’s external, it does take some planning in advance.

Michael Blake:
Yeah. You know, like you said, I think that’s a great quote. We all will exit, right? Sometimes voluntarily, sometimes not. And if you really decide you’re going to hang on to the very end, it’s sort of feet first. And so, when we talk about—and what I like about what you’re describing too is that, sometimes, a succession plan means that a succession in the classical sense just may not be feasible, right?

Bruce Gaynes:
Right.

Michael Blake:
Or it may—and it may not be feasible from an economic perspective. It may not be feasible from a family politics perspective, things that have nothing to do, at least, directly with economics. So, you know—and if you know how to do that, if you kind of know that going in, right, that means you’re not going to waste a lot of time and energy on things that just aren’t going to work out.

Bruce Gaynes:
Right, right.

Michael Blake:
And I think that’s critical.

Bruce Gaynes:
And sometimes you have to find out what’s going to work and what’s not, because it’s sometimes the owner assumes that something will work, but they don’t necessarily have the objectivity that that is required to evaluate it. Sometimes, they don’t even have the conversation, particularly if they want to keep it inside the family. They just assume that son or daughter is ready to take over the business. And when you talk to son and daughter, they may not have any intention at all of staying in the business after mom or dad is gone.

Michael Blake:
And I think I think adding to that, I mean, you know, we both know we’ve been around long enough. We know that when you have this Venn diagram of family and money, conversations get awkward-

Bruce Gaynes:
Yes.

Michael Blake:
… at a minimum, or, sometimes, it never happened at all, which is where it kind of where we come back to the succession planning. And I’m curious. if you agree with my observation. I think for a lot of business owners, succession planning is up there with writing a will and taking out a life insurance policy because, in some respect, you’re confronting your mortality.

Bruce Gaynes:
Yes. But it’s more than that because, you know, sometimes, people have an awful lot tied up in their business in terms of their own self-evaluation, their own ego, et cetera. Their own purpose in life is, sometimes, tied up in what they do 40 plus hours a week. And so, for a lot of people, it may be even more difficult than death because after death, there’s not much that they need to do. But during their lifetime, they’ve got to figure out, “Okay, how is this going to affect the way I look at myself? How is this going to affect the way other people look at me and treat me? Are they going to ignore me now that I’m no longer the boss?”.

Bruce Gaynes:
And then, they also have to confront, what am I going to do now? You know, am I going to be happy playing golf seven days a week, or tennis, or whatever else they might do? What are they going to do to find any kind of meaning at all in their existence? Some people have a great deal of difficulty facing that. Just this past week, I was talking to a friend of mine who left an executive position in a major company, and he’s not had any problem at all, but I do find that his carefree feeling about what he’s doing now is probably less common than the complaint of, “I left my business. Now, I’ve got—I’m trying to figure out what it is I want to do with myself.”

Michael Blake:
So, when a lot of people think about succession planning, I think a lot of people’s minds turn to this notion of managing tax liability. And taxes in a succession can be very important. In fact, one reason between the New York Yankees and the Washington Redskins is that the Yankees apparently have very good tax planning because the Steinbrenner is still on the team, right. But when Jack Kent Cooke died, the Washington Redskins did not, and Dan Snyder, and people are gonna start booing at their radios now for Redskins fan, but Dan Snyder is on that team primarily because they couldn’t afford to pay the taxes to keep the team, basically. But it’s—I mean, that’s part of it, but it’s also more than that, isn’t it?

Bruce Gaynes:
Well, yes. The taxes are important because, certainly, almost every client wants to minimize estate gift to income taxes. And that’s going to be part of the plan is to consider those aspects of it because it’s going to have a direct impact on what the owner is going to be able to take away from the business. And by the way, that’s irrespective of whether it’s an inside or outside transfer, you’ve got to figure and think about the taxes either way. But that’s not the the only goal of entering into the succession planning arena, and doing so with both feet, and being serious about this as a critical part of the business and the business life cycle. You want to figure out, for instance, for the owner, if they’re going to dispose of the company, and they might be bought out by a third party or might be bought out by an insider. What is it that they’re really going to need in order to retire or move on to the next phase of their of their life?

Bruce Gaynes:
They also want to think about—and this is why it takes some planning and some advance preparation, they want to think about what it is they need to do with, if anything, to build their business, to get to that point where they’re going to walk away with enough money to to satisfy themselves. They’ve got to get each element of the business that they can under contract. When I talk about element of the business, I’m talking about having employees who have agreed contractually to stay on for a particular period of time, to not compete with the company because a buyer isn’t going to want to buy a business, and then find out that the sales force just left and created their own competing company.

Bruce Gaynes:
And that’s a a serious risk. Normally, you want to find a management team that’s going to stay on, with whom you had a serious discussion about the fact that they’re being hired or their continued employment is premised upon the fact that they are going to be around after the sale, and it may be appropriate to compensate them for that, but that would be a matter of arranging things in a way, a smart way, so that your management team doesn’t walk off just as you’re negotiating a transfer of the stock, again either to an insider or outsider. These are considerations really for either situation, maybe that you need to increase the earnings, the EBITDA, the earning earnings before interest, taxes, depreciation and amortization. It may involve even jettisoning certain aspects of the business to make it attractive for the next owners to come in.

Bruce Gaynes:
I’m working on a case right now where we’ve got a company that is in the construction business, and they’ve got a retail operation. The retail operation is a little bit of a distraction, both in terms of time and money, and it’s not part of their core business, and it makes their company less attractive to others who might be coming along. And they’re in a situation where they’ve got people inside the business, younger generation inside the business, that could take it over, but they might decide to go sell to an outsider.

Michael Blake:
And, you know, these things you’re talking about, they are so much more expensive to solve when there’s a transaction on the table than when there isn’t, right?

Bruce Gaynes:
Right. That’s right.

Michael Blake:
Because these people are not dumb if you hired correctly, and they’re going to stay when they have leverage.

Bruce Gaynes:
Yes.

Michael Blake:
Right? And that gets to, you know, looking at things years in advance. It’s not just because businesses are aircraft carriers, and they just have a very long or wide turning radius. It’s also you can just imagine if you go to an employee and said, “You know what, I like to sell my business, and I’ve got $20 million dollar offer on the table, but they won’t do that deal unless you agree to stay for two years,” right? Well, well, well.

Bruce Gaynes:
Right, right.

Michael Blake:
I am going to call my attorney, and I’ll be back in touch with you in about a week or so with my list of requests-.

Bruce Gaynes:
Right.

Michael Blake:
… in order to agree to a stay bonus and signing [crosstalk]-

Bruce Gaynes:
Like terrorists, yeah.

Michael Blake:
Yeah, exactly right. Exactly right. So, now, I introduced the show from a long-term succession planning perspective. But there’s also a different time horizon, which is the short-term succession planning perspective to write and, really, it’s more like contingency planning or an unexpected succession but, nevertheless, it’s a kind of succession, right? I mean, that’s something that’s also important to think about, isn’t it?

Bruce Gaynes:
Right, it is. It is. Many years ago, I had a client—and succession planning is not just for brick and mortar businesses. It can be for service businesses. And this particular client was a CPA who had a firm that had no other CPAs in it. He had, essentially, bookkeepers working for him. And he was concerned about his clients, and it wasn’t really quite as much a matter of, “How am I going to make money out of this?” but he was concerned about what happens if something happens, you know, “If I die, become disabled, who’s going to take over my practice, and see that my client’s tax returns get filed on a timely basis?”.

Bruce Gaynes:
And so, frequently, if you had a firm that had several accountants, you might have some sort of buy/sell agreement between the the the owner, the practice, and people who were familiar with the clients, who are working on the clients, they would be the logical people to take it over. But he didn’t have that because he couldn’t continue as a CPA firm unless it had a CPA who is running the firm. And so, what we actually did is we reached out to a friendly competitor, and we did a buy/sell agreement between the two CPAs, and so that if one or the other were to be unable to continue to practice, the one who was able to continue would be able to take it over. There would be a set formula for determining what was going to be paid for that, and it would then inure to the benefit of the possibly disabled CPA or perhaps to the family if the CPA passed away.

Bruce Gaynes:
So, that’s the contingency type of planning that really is still part of that larger picture of succession planning. When we do think of succession planning, traditionally, we think about something that’s more long term, three years, five years, as I mentioned. And it would involve trying to possibly improve the businesses, so that the next parties are able to run it more successfully, or pay more for it, or able to achieve some other goal.

Michael Blake:
So, when we talk about a succession plan, is it something that needs to be a formal document? Do people maybe just take notes on their phone? Is it on a napkin someplace? Is there a 60-page document? What, in your mind, is the kind of deliverable, if you will, of a succession plan?

Bruce Gaynes:
Well, I think it’s very important to have one that’s written. Does it have to be that way? No, but I think it’s much better because if you have a written plan, it records what your thought was back in 2019. And then, you know, in 2027, when you’re looking back at it, you’ve got some sort of track record of, what did you have in 2019? How have things changed? And it’s part of your overall general strategic plan for the business. But the succession plan itself is something that ought to be in writing (A), for the owner himself or herself; and then, (B), for others if the owner is no longer around, if we do have that situation where the owner is taken out of the business rather suddenly. So, the least, they’ve got some sort of idea. Plus, it becomes the basis for how you’re going to make the business better.

Michael Blake:
And there is a lot of legal documentation that can go along with it. And in addition to aN overall sort of non-legal strategic plan, it may involve getting restrictive covenants, what we sometimes call covenants not to compete or covenants not to solicit. Maybe a function of getting that in place, getting confidentiality agreements in place. It may be other forms of buy/sell agreements. Maybe even agreements that deal with co-ownership such as shareholder agreements or LLC operating agreements in place. It may involve having a lease. A lot of businesses, at least, in part, the success of the business is dependent upon their location. If you don’t have a good lease, or the lease is not long enough, or you’ve not negotiated the rights in correct kind of terms, it will have a significant impact on either the salability or value of the company or both.

Michael Blake:
And it seems to me, the way you describe a succession plan, it sounds like kind of a business plan but with a very narrow specific focus. Is that fair?

Bruce Gaynes:
Well, it doesn’t have to be a narrow, specific focus.

Michael Blake:
Got it.

Bruce Gaynes:
I mean, the plan itself, I think, is an integral part of your overall business paperwork in terms of having something that is strategic, something that looks at the various elements in the business, and that has implementary documents such as the legal agreements to keep management in place.

Michael Blake:
So, we’re talking about legal agreement, but a succession plan itself doesn’t necessarily have to be a legally binding agreement, right?

Bruce Gaynes:
Correct. It would refer to those legally binding agreements. And it might have, as I say, the sort of things you would ordinarily find in a strategic plan. It might have, how are we going to improve these these earnings before taxes, et cetera, what we call EBITDA? And it might have in there, what’s going to happen to the business? Who are the people who are going to be capable of taking it over? The functions that the owner is performing at the current time, if there are functions that they’re performing, who’s going to perform those functions?

Michael Blake:
So, as my own kind of war story with with succession planning and legally versus non-legally binding, a client of mine, right, that I’m working with right now is working through a nasty shareholder divorce. And the genesis of that divorce is the fact that my client, who’s the majority shareholder of that company, had conversations with the minority shareholder about maybe someday down the line, right, majority shareholder would agree to be bought out by the minority shareholder but with no particular commitment, no particular timeline.

Michael Blake:
And then, one day for reasons that are not clear, the minority shareholders said, “You know what? I gotta have this thing now. I just do.” And my client wasn’t right to do that yet. And it’s led to, as I said, kind of a nasty kind of shareholder split that I don’t think has been really positive for either party, in all candor. But thank God that there was not a legal agreement in place because one person was ready to do that transaction, the other person wasn’t. So, you know, the benefit of some flexibility, I think, has served my client very well in that regard.

Bruce Gaynes:
Well, it does serve clients well in some regards. On the other hand, there are situations where the minority partner has a particular or critical skill. and walking away from the deal or having the company split can be very damaging to both parties. Well, if they had properly discussed and documented, it’s not just a question of some lawyer coming along and him imposing upon the parties some particular paperwork, is really the situation that you described might very well have been handled best, not by lawyers, but by just frank conversations and honest conversations.

Bruce Gaynes:
And sometimes, when I represent the minority owner or somebody who’s coming into a business, the commitment to transfer the business to the person who’s coming in. And, frequently you got to understand, they may be leaving another really good position. There’s somebody of value for a reason. They’ve got a history of success. They’ve got, perhaps, promises for other opportunities that they’re walking away from. And normally, I would want to see some sort of agreement upfront of what’s going to happen in over what period of time, and so that these things would be agreed to upfront. We would want to have that, so that everybody knows, at least, at the outset, you you never can predict the future, you’d never know if things are going to work out as as either the parties or their lawyers hope, but, at least, you’ve got a plan that can be altered, can be amended, may need to be amended, but a plan where we don’t have people second thinking all of this and having one party dedicate himself or herself to a particular course of action, and then having the other party not comply.

Michael Blake:
So, you said something that I want to underscore because I think it’s quite smart. And that is that part of the calculus here is identifying individuals that are absolutely critical to the ongoing kind of continuity, success, and value of the company, right? So, that succession discussion may take a—probably will take a different flavor, a different character, depending on the nature of the person involved, right? And in some cases, I have business owners, and I think you have clients like this too, they identify individuals they just want to take care of, right? They’ve served the company loyally for 25-30 years, want to give a little something on the way out to thank them for their service and loyalty.

Michael Blake:
And then, there are others where, like you said, this business becomes less viable because that person is in it or, at least, a massive pan the neck to try to then have to recover with that person out of the business, or even just a third disgruntled. And for whatever reason, they understood something differently from what the other shareholder did. And, you know, a disgruntled shareholder employee can do immense damage to a business without even leaving.

Bruce Gaynes:
Right.

Michael Blake:
Right?

Bruce Gaynes:
Right.

Michael Blake:
They can break a lot of China on the way out. So part of that decision process in the succession is assessing kind of who needs to be taken care of and what their role is in terms of a successful succession.

Bruce Gaynes:
Correct. And it may be that if you’ve got somebody who is not capable of running the business themselves, but you’ve got some reason to believe that they’re not going to take direction from anybody other than the current owner, you may need to remove them from where they are before you ever begin the discussion because they may be the problem. And in setting the succession up, you may have vital tasks that they are accomplishing, but if they’re not going to do that for somebody else, you may need to get somebody in there ahead of time to fulfill that role.

Michael Blake:
So, I think we made a pretty strong case that a succession plan is desirable, and there’s some exposure there if you don’t have one. So, I’d like to move ahead and talk about, can we identify maybe the three most important features of a good succession plan? There are actually 28, but we don’t have time to go through 28. Nobody will remember more than three. So, if we had to sort of pick three, what might they be?

Bruce Gaynes:
Well, I think, you know, I tend to agree with you, with the 28. You know, I think the most important thing is to assess the business because, I think, the three most important things are going to change, depending upon what business you’re talking about. And so, in some cases, it’s going to be driving a higher EBITDA because that’s the only way that the owner is going to be able to get out. In other situations, it may be resolving. And this is particularly the case in family businesses, resolving how are my kids going to get along after I’m out of the picture? Will they get along?

Bruce Gaynes:
I’m dealing right now with a rather new client. So, I’ve sort of jumped into the middle of the fray, but we’ve got one sibling who died, one sibling who’s detached, two siblings who are—the spouse of the deceased sibling and another sibling were half in and half out. And we’ve got a significant problem because we’ve got to deal with who is going to own what aspect of the business, and how is any kind of transition going to be financed. And in fact, I was brought into the business or referred into the business by the banker who is trying to help them solve the financial aspect to this. And, you know, unfortunately, this this business did not have a succession plan that was good. It’s a successful business in some ways because it’s in the third generation of the business, but it’s because of the lack of planning, having written, agreed-upon plans for this, there’s kind of a mess there right now.

Michael Blake:
So, this segues very nicely into the next question that I have, which is, you know, a succession plan, to my mind, is a fairly intimate document for the family if it’s going to continue to be a family business. We’ve been very clear. it doesn’t have to be that way. But, certainly, for the business, how do you help businesses kind of formulate those plans and make sure that they work correctly?

Bruce Gaynes:
Well, I think the thing that that we need to do first is to assess what the objectives really are. And part of that involves finding and figuring out what is it that needs to be done with this respective business, and then bringing in the proper advisors to help them do that. And there are people who are dedicated, if you will, or hold themselves out as people who do nothing or succession planning generalists who try to look at a—take a holistic view of the company, delve deeply into various aspects. They might be spending significant amounts of time in the business, learning what’s going on, getting an independent view of this business, and then making recommendations.

Bruce Gaynes:
Sometimes, there are situations where you’ve got a lack of legal documentation. You may need business lawyers in there. You may need some estate planning lawyers in there. I usually cover both the business and the estate planning because you’ve got significant tax issues, as you mentioned before. It may involve getting the proper accountants involved. I’ve got a case right now where the entire accounting is based upon some people whose loyalty to the company is not assured. And so, you may need to get the proper accountants in there, so that they get their arms around what this business is worth.

Bruce Gaynes:
I’m dealing with another business. As matter of fact, I was talking to my client on the way over here. And again, a new client. She’s allowed a management company to run the business for the last several years. And the management company just has completely fallen down in terms of providing proper accounting, and proper records, and general ledgers, and things like that. So, sometimes, you just gotta get that right person in there. It may involve getting financial planners or insurance agents in there. That may involve getting a business broker. If we’re going to sell to a third party, maybe that we need to get a business broker in there or an investment banker if it’s a larger business. We may need to get a business valuation person involved because it might very well be that the owner has no idea of what their business is worth or no accurate idea of what their business is worth.

Michael Blake:
Thank you for that, by the way. I appreciate that. Well, Bruce, we’re running out of time, and I know you’ve got a lot to do, and we yanked you many miles out of town to record this. And as you’ve indicated, there are 28 other things that could be looked at here. If somebody wants to learn more about succession planning and wants to ask you a question about it, maybe they would even like your help, how can they best contact you?

Bruce Gaynes:
Well, I can be called. I mean, my office is inside the Atlanta-Georgia perimeter, what we call the Perimeter Highway, just off of 400, Georgia 400. I can be reached by phone at 404-467-7526. That’s my direct dial. I can be found on the Internet. Our firm can be found at www.kkgpc.com And KKGPC stands Kitchens Kelley Gaynes Professional Corporation. So, I can be reached by either of those means.

Michael Blake:
All right. Very good. Well, that’s gonna wrap it up for today’s program. I’d like to thank Bruce Gaynes so much for joining us and sharing his expertise with us. We’ll be exploring a new topic each week, so please turn in so that when you’re faced with your next business decision, you have clear vision when making it. If you enjoy this podcast, please consider leaving a review with your favorite podcast aggregator. It helps people find us, so that we can help them. Once again, this is Mike Blake. Our sponsors is Brady Ware & Company. And this has been the Decision Vision Podcast.

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Mike Blake | Decision Vision Podcast | Brady Ware CPAs

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