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5 QUESTIONS WITH: Dan Crowley, Director, Business Advisory Services, Quadrant Private Wealth, Bethlehem

November 30, 2015

How is the local economy?

Our clients are confident enough in the local economy to expand their business plans. Their capital expenditures are up, and I know they are looking to grow their workforces.

My only concern is the serious drop in new housing starts; commercial development can only take us so far.

Are business owners confident? Why or why not?

We work extensively in the construction industry and their off-shoots, and that group certainly is confident. It has been a great ride the past 24-36 months.

We work with our clients to identify the lead indicators that drive their industry and establish a plan from those findings.

We spend time looking at the rate of change in their sales, not just “year to date” or “rolling 12” numbers. This prepares the owner to make changes to their operational plan well in advance.

Right now, everyone is still maintaining increases in rate of change.

What is a common misconception about business succession planning?

Definitely when to start. The majority of the calls we receive are from owners looking to transfer their assets within three years.

That will work for a third-party sale but is extremely difficult when transferring a business internally to family members or key employees.

If you could change one thing about business succession, what would it be?

That’s easy, tax law.

Right now, a child must use after-tax income (about 40 percent tax rate) to acquire a business from their parent, who must pay capital gains tax on the proceeds (about 20 percent tax rate). That means you need $100 of income to generate $40 of cash to the parent. Wow.

Right now, firms like ours work through more complex options to make this less painful.

What is the best piece of advice that you can give a business owner with respect to eventual succession of the business?

Start early and start often. Because of issues like tax law, communication, changes in market conditions, etc., the challenges for owners to transfer their ownership are vast and ever-changing.

We recommend a “seven-to-10 year in advance” planning meeting with your key advisers.

Also, be prepared for life changes along the way. It is rarely a smooth transition.

 

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