Boating Industry

March 2016

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March 2016 | Boating Industry | 27 [ Best Laid Plans ] EMPLOYEE STOCK OWNERSHIP PLAN continued from page 25 those employees, thus not placing too much risk on said employees pur- chasing through a qualified retirement plan; The business has little to no debt, as an ESOP looks at the risk associated with the employees and the risk of an owner's leverage on the business; The business already has a strong leadership and management team in place that can take the place of the exiting shareholder; The business has a large retirement plan that is well-funded, which can be used to fund the purchase of the buyer; and The business is going through substantial growth that is stable, has a long operating history, has strong banking relationships and has other access to capital. ESOPs can generally range from $10,000 to $50,000 a year to maintain, due to the cost of the reporting, measuring (in terms of the value measure- ments) and the education of the employee group participating in the ESOP. Many ESOPs have employees with a large percentage of their retirement invested in the business. "The general rule in our experience … ESOPs are a very challenging tran- sition strategy to use, both financially and economically. It's generally expen- sive from an administrative, oversight and annual valuation requirements," said Bielen. "So ESOPs, generally, we have found are more likely to be one of the last alternatives used when structuring an internal transition plan." SUCCESSION PLANNING EXPERTS If you are looking for help planning your exit strategy, consider using an expert. Below is a list of options within and outside of the marine industry: Spader Business Management ( Parker Business Planning ( Thomas Williams Deans, Ph.D. ( The Michaud Group ( Heidrick & Struggles ( the next generation potentially brings to the table." One wrinkle that can arise in succession planning is the reluctance of an existing generation to let go. On the financial side, the outgoing generation will at times continue to exert influence and retain control until they have satisfied their financial requirements. "As long as they depend on rent or cash from the business to fund their retirement, it's going to be very difficult for them to let go of control, and they shouldn't necessarily let go of control either if they still have a majority of the risk," said Spader. "So the goal should be to get them off of those and make the business independent as quickly as possible. Another way to say that is they need to be at a point where they don't need any income from the dealership to retire the way they want to." FAMILY BUSINESSES… continued from page 23

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