Coordinated Team Effort Created Five-Year Transition Plan

How Platinum used a family council for effective communications and decisions.

Situation

The founder and owner of a 30-year-old family business (precision machining) heard about a fellow business owner’s succession plan with Platinum Group’s help. An introduction was made and work started to create a transition for the founder, his wife and two children—a son who had left the family business and a daughter who worked in the front office. The business had been successful and profitable with a stable customer base, yet the owner was in his 60s and did not have a succession plan.

Challenges

  • Reluctance of the owner to let go of the business yet encouraged by his wife to make timely decisions and move on.
  • Uncertainty about who would run and eventually own the business.
  • Concerns about how to get money out of the business to fund retirement.

Response

Platinum interviewed all family members to gain independent perspectives of the business and their future interests in it. A family council meeting was subsequently held with all family members, including spouses, to express their opinions on the family business and long-term intentions. The council meeting clearly identified everyone’s viewpoint—the founding generation’s desire to move on and spend more time at the lake; the son’s wish not to be actively involved in the family business and the daughter’s hope to continue in a managerial role. The process led to identifying two key employees as succession candidates as part of a team with the daughter. A long-term transition plan was developed with the father and succession team that included a five-year vision, growth goals, budgets, and performance measures. It also included how roles and responsibilities would shift from the founder over the next five years.

Platinum coordinated transition plans with three advisors: (1) an accountant who created a five-year performance and cash flow projection; (2) an attorney who provided the buy/sell agreements and legal documentation; and, (3) a financial advisor who provided company owned life insurance on the succession team and other cash accumulation vehicles during the five years to fund the ownership change.

Results

After six months, there is a detailed and well-documented transition plan with a funding vehicle in place for the succession team to acquire controlling ownership after five years. The founder/father has a defined sale of business with a trailing stream of income for 10 years. He is gradually reducing his time in the office by one day a week each year to help him pull away. The family ownership will continue into the next generation.

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