By Angela Swinson Lee, Special to The Washington Informer
Five days before Wilhelmina Bell-Taylor passed away in 2008, she signed a letter of intent to sell BETAH Associates, a communications management consulting firm that provides event management, peer review and other professional support services, to alleviate her daughter, Michelle Taylor, from what she thought would be a burden.
However, Michelle Taylor decided not to go through with the sale. “Because my mother thought she was helping me by selling BETAH, there wasn’t a succession plan in place, so I had to really figure things out quickly,” said Taylor, who is now CEO of the company.
Her advice to business owners is to begin with the end in mind.
Fredric Walls II, D.C. market team lead for J.P. Morgan Private Bank, agreed that the lack of a plan is one of the key challenges he sees with families regarding succession.
“We regularly see business owners start the succession planning discussion too late. It’s better to have a simple plan that needs a little or even a lot of editing later on versus no plan at all,” Walls said. “Succession planning is not just about the business aspect, there is a human element to the discussion. Oftentimes these are tough conversations to have, but they are important. It’s not just a business. It’s someone’s livelihood.
Walls said business owners should know which of their heirs would want to take over the business.
“Your plans should consider every scenario, for example, if you have three children and only one or two would like to take over the business, how will you still provide for equitable distribution for the next generation,” Walls said adding that buy-sell agreements and insurance are great tools to have in place.
Michelle Taylor was quick to assume the leadership role in the company her mother started in the basement of their home in 1988.
Today, Taylor said that when she speaks to emerging business owners, she stresses the importance of determining early on what their exit strategy will be.
“I had to scramble very quickly to figure things out to keep BETAH going forward, because my mother was BETAH. I mean, she really was the driving force, and so that is something that I believe is very critical.” Taylor added that she has put a succession plan in place because she wants to continue to grow the company.
She agreed that such protection as keyman insurance is important to have in place.
“If something should happen to you as the leader, you need something in place. This way, if there isn’t a full-on documented succession plan at least you have some type of protective measures in place as a stopgap resource and an interim measure to help the leadership team move things forward,” Taylor said adding that that its also important to have clear lines of signing authority documented.
Walls said some tips businesses can use to help set up the next generation for success include formalizing roles as a chief financial officer and general counselor. A financial advisor, CPA and trust attorney should also be a part of the process, Walls said. “So many owners take on a lot themselves, but when planning for your succession, it is a requisite to map out ownership of these responsibilities.”
Walls said, a financial advisor can analyze wealth and taxes and how much of an estate will go to heirs.
Most of all, Walls said it’s important to plan.
Planning should also extend to non-heirs who might be a good fit to succeed in company leadership but may not inherit the company. “Take careful consideration of how the company will continue as a going concern given the human element involved between your heirs and non-heirs,” Walls said.
A succession plan should also be in place for retirement.
Once a plan is in place, Walls said it should be reviewed on a regular basis.
“It’s not a “once and done.” If you had a conversation with your children three years ago and they were interested in taking over the family business, sit them down again and see if that’s still the case, because their answer might have changed, fortunately however- you will be able to plan accordingly.”
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