Excuse Me. Will You Be My Successor?

retirement_road-150x150I was once teaching a financial education class to retirees, about the importance of assigning someone to be your  power of attorney. For those that are unfamiliar with the term, it is a legal document which appoints someone you trust, to make legal and financial decisions on your behalf when you are unable to.

A gentleman in his 60’s raised is hand and said. I’m not married. I have no family. I have no friends that I trust. Will you be my power of attorney?

At first I thought he was joking. Here I am, a total stranger, talking to this gentlemen in a classroom filled with people, and he asks this question. It was no joke. He recognized the importance of a POA, but had not developed the necessary human relationship with any one that he trusted, so he asked a total stranger.

Yet there is a strange similarity to this conversation and the one I have with music business owners almost on a daily basis.

Business owners recognize  the positive impact a continuity plan will have on their retirement, legacy and the opportunity for financial freedom. Still many have not identified, trained, or have a formal employee retention agreement in place necessary for your succession plan.

Here’s how a typical conversation usually goes.

Jaimie- So Charlie, what’s your plans to start unwinding your day to day involvement with your music business. Have you been training a successor?

Charlie- Sadly no. I’ve been so busy putting out fires all these years, it’s not something I have focused on. There are a couple of people on my team that would be great, but I have had no formal discussion because I know these managers lack the financial means for the down payment.

Jaimie- Tell me Charlie, if there was a way to help fund your manager’s down payment over time, while retaining this person, would that be something you would want to consider?

Charlie- Tell me more.

Jaimie- I have two questions for you? Are you able to put in the necessary time over the next 5-10 years to transfer your ideas, your experience, your vision to your future successor?  And  are you open to creating a funded long-term retention agreement with your future successor?

Charlie- You bet. I’m in no hurry to leave.

Jaimie-  Here’s your narrative to your potential successor.

” I have reached a position in my career where I’m ready to begin training someone to be my successor and that person could be you. Now I recognize that you may not have the cash on hand to pay for a down payment on the business. So  if you work for me during the next 10 years, and you do the outstanding job I know you’re capable of, I’m prepared to  put a savings plan in place for you to have enough cash down the road for you to begin purchasing the shares. This vehicle will be funded with a life insurance policy, and I will pay the premiums. How does that sound?”

I don’t know about you, but if I was a 20 or 30 something year old, and looking for an opportunity to own a fantastic business, I would jump at this offer. Think it about  this way. You are opening a whole new world for this young person, who you will mentor, train, motivate and retain. In return, you have an exit strategy which you control.

Sometimes I hear, “oh it’s just easier if I sell the business to my competitor.” While this may be true, who do you think will control every aspect of the sale of your business; you or the buyer? Here are potential disadvantages to a third party sale for the seller.

1- Taxes- The buyer will want this to be an asset sale, as opposed to the more favorable equity sale. That usually spells higher taxes for you.

2- Time- The buyer may want you to stick around long enough to make sure he or she is receiving what you are promising. The buyer will most likely control the timing of payments to you.

3-Valuation- The buyer will probably want to pay you the lowest possible cost. That means cost of inventory and not much for good will.

On the other hand if you are able to train a person under your careful watch, the business can be sold to a market you create and control.

Yes this takes planning. Still, this is after all the most important financial decision you probably will ever make. Exiting your business should be your crowning achievement. Your legacy.

There are many business owners who have regretted the terms of the sale of their business before the ink was even dry on the contract. Don’t be one of them. Let’s talk. I’m all ears.




Jaimie Blackman

Jaimie Blackman — a former music educator & retailer— is a Certified Wealth Strategist & Succession Planner. Jaimie helps business owners accelerate the value of their company so it can be sold profitably when ready to exit. He is a frequent speaker at the National Association of Music Merchants, (NAMM) Idea Center and has spoken at Yamaha’s succession advantage.

His content has been published in multiple trade magazines including: Music Inc., Music & Sound Retailer, Canadian Music Trade Magazine, and Sound & Communications. His column is now published monthly in MMR— Musical Merchandise Review—and contributes to NAMM U online.

Jaimie is CEO of Jaimie Blackman & Company, and Creator of MoneyCapsules® and the Sound of Money®. To register for Jaimie’s live webinars, or to subscribe to his podcasts & webcasts, visit jaimieblackman.com.

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