MINNEAPOLIS, MN and ST. PAUL, MN--(Marketwire - Feb 21, 2013) - American small business owners are not prepared to face the inevitable. About 30 percent of family-owned businesses make it to the second generation, only 12 percent to the third generation and 3 percent to the fourth and beyond*. Unfortunately, most of these vital American economic engines have not planned for changes in leadership.
Although companies should consider planning for succession five to 10 years before a transition is expected to take place, many small business owners find themselves heavily focused on day-to-day business operations, especially in economically challenging times, and do not invest the time necessary to develop a comprehensive succession strategy.
This is a great concern, as the U.S. relies on the nearly 30 million small businesses that employ more than half of the American workforce to support the economy and gross domestic product.
"It's never too early to begin succession planning, particularly when you consider that fewer than half of those expecting to retire in five years have actually named a successor," said Steve Weitz, Senior Vice President, Minnesota Business Banking at BMO Harris Bank. "In order for business owners to ensure their business continues to thrive, succession planning should be a priority that mitigates risks associated with economic uncertainty or a sudden shift in management."
Weitz offers small business owners the following advice to get them started down the path of succession planning success:
Start early - Succession planning must begin at least 10 years in advance in order to realize the full potential value of the business and to ensure a smooth transition to new ownership.
Consider all your options - Whether a small business owner chooses to sell, transition to a family member or business partner, or dissolve the business, there are many complex issues that need to be evaluated before a decision is made.
Speak with a financial advisor - Each business is unique; a succession plan should reflect this and be tailored to the particular aspects of a business. A financial advisor can help small business owners develop tailored solutions and the ideal succession strategy to meet their business needs. When consulting with an advisor, consider the following: who should succeed you in your role; when would be the ideal time to begin the transition; how should the transition be structured; and what are the short- and long-term financial implications?
* Family Firm Institute
About BMO Harris Bank
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through over 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion. Banking deposit and loan products and services are provided by BMO Harris Bank N.A. and are subject to bank and credit approval. BMO Harris Bank is a trade name used by BMO Harris Bank N.A., Member FDIC.