For most owners, the business is their most significant asset. Starting and running a business carries its own set of risk exposures. Managing that risk exposure is key to growing a healthy business.
There are several business planning factors that can impact the economic security of a business owner’s family. These may include the type of business entity you choose, the state you choose to do business in, as well as how you manage your business, human resources and taxes. Business risk management identifies your options for handling these risks, such as:
Risk management is intended to minimize financial and other losses to your business, potentially associated with these risks.
Executive compensation focuses on both cash and non-cash approaches. The size and structure of the business significantly influences your compensation systems. Large businesses tend to provide owners with sophisticated and sometimes complex compensation formulas. Small businesses tend to adopt a more straightforward compensation approach. Examples of compensation may draw from insurance benefits, qualified retirement plans, stock options, personal performance initiatives, and other tax-advantaged nonqualified plans.
Exit and succession places focus on issues specific to business owners and shareholders. All owners will exit their business at some point, and mapping out what a smooth exit looks like is an important process. Business exit and succession planning focus on issues specific to business owners and shareholders, including supporting your retirement and your family’s future. Exit planning coordinates the management of your entire business life cycle through:
Succession planning focuses on the transition of a business from an existing owner to a new owner. Although key factors vary extensively with business type and industry, there are some factors common to all business transitions including the creation of a sellable business and the formulation of specific transition mechanics at time of sale. Additional succession planning issues include positioning a business for sale, determining valuation and terms, grooming senior management and creating strategic alliances.
This material has been provided for general informational purposes only. Investors should consult with a business planning professional regarding their individual situation.