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Build a better succession plan for your small (family) business

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Effective succession planning begins the moment you buy your small business.

It did for Chuck Gassmann, who in 2011 purchased Bell Brothers, a Des Moines, Iowa, heating and cooling service founded in 1955 by the Bell family.

Gassmann already had been a longtime employee when he assumed ownership. He also had a vision for growing the business over the next decade and then in his 60s selling it to his fortysomething son, Jason—if his son’s vision aligned.

“I didn’t have it in my head that I’d be the boss someday,” Jason says of his mindset when he started working full-time in 2002.

“I felt like I was just trying to earn respect for the first 10 years.”

The challenge: How can a small business—especially a family business—map out a solid succession plan while keeping up with the daily work and avoiding personal disputes that might derail it?

Steve Utsler is a financial representative with Principal® who has worked with the Gassmanns on their succession plans and finds it easy to empathize: His own father has owned a family business into his 80s.

“Most business owners are head down, working every day in the business, trying to grow the business, build a brand, do good work,” Utsler says. That can delay steps toward a methodical succession that enables the seller to launch a new career or retire while ensuring the business stays profitable for the buyer.

Utsler cites the “three legs of the stool” for good business succession:

  1. When: What’s your ideal timing for business succession?
  2. Who: Do you have a buyer in mind, or can you find one in time?
  3. What price: Do you know the value of your business?

Read more: “Business succession planning in 6 steps

To help determine and safeguard the value of your business

Business valuation: This helps provide a sturdy foundation for succession, Utsler says, and too often that valuation is woefully out of date. He and his colleagues often arrange informal valuations for business owners as part of the process.

Key employee retention: Which crucial expertise and institutional knowledge does the buyer need to help the business thrive after the sale? Utsler helps business owners explore strategies to retain key employees—such as deferred compensation plans.

As the Gassmanns complete their business succession, Jason has spent the last few years making most of the major decisions, with his father easing into a mentor role.

Jason already is preparing for the next succession: He plans to update his business valuation annually.

What's next?

Bell Brothers isn’t affiliated with any company of the Principal Financial Group®

Steve Utsler is a Financial Representative with Principal Life Insurance Co. and Principal National Life Insurance Co. and a Principal Securities Registered Representative.

This communication provides educational information only with the understanding that Principal® and its employees are not offering legal, accounting, investment or tax advice. Business owners should consult with their counsel or other professionals when making business decisions.

Guests may be compensated for their appearance and Principal does not endorse the businesses of its guests. Some guests may own Principal products or use our services. Unless noted otherwise, none of our guests are affiliated with Principal, Des Moines Iowa.