Today's Practice: Changing the Business of Medicine National Edition Q1 2018 | Page 58

F I NA NCE
Succession Planning
The best course of action may be either to identify
strong candidates within your company who can
continue to run the business and provide a source of
financial security for your family, or to look at the
potential for selling the business to an outside party.
Whichever course you eventually decide is right for your
business, there are steps you can take now that will ease
the transition.
Groom new management.
Who is best able to run the business in your absence?
Perhaps your children have spent years growing up in
the business and have become capable managers in their
own right. If not, look to your existing management
team, and make your intentions known. Be sure that
candidates are capable and interested in taking over.
Edward Waldron, RFC
ESOPs.
If you have a large number of employees, another
option is an Employee Stock Ownership Plan (ESOP),
whereby a bank lends money to the ESOP to purchase
your interest in the business, and the employees then
buy the shares through regular payroll deductions.
Planning for succession can be an unpleasant task,
although the outcome can be even more unpleasant if
you fail to plan. You’ll have a lot more options if you
start to plan when things are going great. What you
don’t want is a situation where your family is scram-
bling to salvage some value from the business after
you’re gone.
Determine a value.
Work with a valuation specialist to get a fair assessment
of what your business might be worth. While valuation
analysis may be an art as much as it is a science, you
should place a value on your business in the event you
decide to sell. There are several valuation methods,
including book value, discounted cash flow, or you
could hire a professional appraiser. If you decide to
transfer the business to your children, a professional
appraisal is generally required to withstand IRS scrutiny.
Draft a buy-sell agreement.
Depending on the structure of ownership, this docu-
ment will be a binding agreement detailing the terms of
ownership transfer between you and your offspring, you
and a non-family successor, or you and your partners.
Be sure to specify how the agreement will be funded.
meet the author:
Ted Waldron, RFC
Certified Financial Planner
Edward Waldron, RFC is a registered representative and
investment advisor representative of Lincoln Financial Advisors
Corp., a broker/dealer (member SIPC) and registered investment
advisor,165 Middlesex Tunpike, Suite 104 Bedford, MA offering
insurance through Lincoln affiliates and other fine companies.
This information should not be construed as legal or tax advice.
You may want to consult a legal or tax advisor regarding this
information as it relates to your personal circumstances. The
content of this material was provided to you by Lincoln Financial
Advisors Corp. for its representatives and their clients.
CRN-1228974-061715
Proceeds from a life insurance policy are frequently used
as a way to fund a buy-sell arrangement. Other options
include loans from a bank or company earnings that are
paid back through an ‘earn-out’ arrangement with your
successor, whereby the loan is paid back in regular
installments.
57
TODAY ’ S P R A C T I C E: C H A N G I N G T H E B U S I NES S OF M EDI C I NE