By Rick White and Mark Will, Executive Partners for W & W Holdings
Like many small businesses in 2019, W & W Holdings had strong, sustainable growth and was meeting or exceeding profit projections. We consult companies across the country to improve supply chain optimization, and for the last eight years we have been busy helping large and small manufacturers launch products, reduce costs and create sustainable profits.
Despite our successful methods of helping companies plan and effectively manage expenses and profits, we were not effectively planning for the longevity of one really important business— ours. Even though we had been saving for retirement and managing assets, we were not strategically thinking about how to properly design and fund our business succession plan. As many small business owners know, this can be overwhelming to tackle but you don’t have to do this alone.
With strategic insights and guidance from our wealth management advisor who had expertise in business and estate planning, we went through an intense four-step planning process every small business owner should also consider.
Step one: A discovery phase affirmed our need to develop a business transition plan from the senior partners to the junior partners over the next three to five years. We suggest you establish a clear delineation between salary, incentives and benefits as employees versus shareholder expectations and business value.
Step two: The creative solution phase focuses on immediate compensation/benefits, long-term incentives and then longer-term business transition planning.
Step three: Consider strategies that reduce risk through key person coverage enhancement and income protection plans, validating salary ranges and incentive comp structures, implementing a retirement plan and establishing cash value buy-sell coverage on senior partners to leverage as a balance sheet asset.
Step four: The final phase of strategy deployment incorporated updates to our buy-sell agreement, including incorporating a “valuation algorithm” to eliminate confusion regarding future buyout expectations enabling our ability to “manage results.”
Our wealth management advisors led the process for us while leaning on our intimate knowledge and understanding of our business needs. The time we invested pre-COVID in this process and planning allowed us to focus on our clients’ needs during the pandemic, rather than become distracted with internal business challenges. It’s proof to us that when you put the time and energy upfront with advisors who are true partners in your business goals, you are ready for most anything.
W & W Holdings, headquartered in Greenville, helps clients develop or fine tune an operational plan and strategy, improve logistics, plan for expansion and new space, open new stores or plants, and manage costs. They work with Upstate Legacy Planning Group, an affiliate of Northwestern Mutual.