What a wild ride the last few years have been. The COVID-19 pandemic, among other things, caused major disruptions to the construction & real estate industry. Business owners went into survival mode, trying to maintain operations with the abrupt changes that occurred as a result. Discussions regarding the future of the business, succession, transition, etc. were no longer a priority and were tabled.
Now that the dust has settled somewhat, construction & real estate organizations are adapting to a new way of normal and operations are hitting full stride. While your business may not look exactly as it did before, it may be the right time to rekindle those tabled discussions about the long-term future of your business.
What Type of Exit Strategies Are There for My Business?
Owners and leadership should be asking themselves these questions: “What is the future of our business, and who are the next generation of potential leaders or owners? Is there a formal succession plan in place? Is the better solution an outside third-party transaction or acquisition? Is the family ready for a transition and do they want to be included? What type of transaction is best for both current owners and successors?”
Now, more than ever, there are numerous transaction types and business transition vehicles available that can suit almost any goal or wish. For instance, an exit strategy that is gaining vast popularity in the industry is Employee Stock Ownership Plans (ESOPs), which is a transition plan that enables employees to own part or all of the company. ESOPs are commonly used to support succession planning by allowing a company owner to sell his or her shares and transition out of the business on a flexible timeframe – and this is just one example of an assortment of succession planning vehicles.
Also, the current lifetime gift and transfer exclusion law ($12.92 million per individual and $25.84 million for married couples for 2023) can allow for another avenue of business transition to the next and future generations, or to beneficiaries without causing additional tax or business operational burdens.
What Is the Best Exit Strategy For My Construction and Real Estate Business?
No matter what transition or transaction strategy you choose, it is important to understand that it will not happen overnight. A well-executed strategy is a journey that includes a well-rounded team of advisors and professionals by your side. Succession and transition plan discussions are often uncomfortable because of the lack of knowledge of what is required.
You have worked your whole life to build your company. Succession planning may not have even been on your radar. The earlier you discuss the transition or succession of your business, and with the right team involved to help the process (with experience in your industry), the more smoothly the process is for everyone to achieve their goals and desired results.
There is no time like the present to revisit future business plan discussions. Reach out to your trusted advisors and rekindle those discussions and begin the process of strategically planning and implementing the succession strategy that is right for you and the next generation of owners and leadership. For questions on planning business succession, contact your Rea advisor.
by Joshua Agin, CPA (Zanesville office)