Webinar Replay: Beyond the Business: Planning for Ownership, Succession & Legacy
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Good afternoon. Hello to some. Good morning and welcome. I'm Rachel Sampson and I have been had the privilege of serving as National Director of Key for Women for the past five years.
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Today's conversation brings together experts and insights to help business owners and leaders think strategically about one of the most important and often overlooked aspects of ownership, preparing for what comes next.
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whether you're considering a near-term transition, planning years ahead, or beginning to define the legacy you want to leave, this discussion will offer practical guidance and perspective to help you move forward with confidence. This topic
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is especially meaningful to me, because after 5 years leading Kiefer Women, I'm also preparing for my own next chapter.
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leading this program has been one of the most rewarding experiences of my career. I've learned from remarkable women and men, business owners, professionals, and community leaders across the country, and have seen firsthand the resilience, innovation
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and determination that define this community. Recently, I am thrilled to announce that I accepted the role of National Director of Client Service and Sales Support for Key Private Bank reporting to none other than Kathy O'Malley Kearney
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This opportunity is exciting, one, to work for such a remarkable leader, but it's an exciting next step in my professional journey that allows me to continue to grow as a leader while also serving clients and teammates in a new capacity, as Kathy says, coming home to a part of the business that I very much enjoy
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This transition, of course, brings a ton of mixed emotions, and I am trying to hold it together, but I'm excited for what's ahead. This role really offers a continued growth for me to work within our wealth business, and also gives me something that's deeply important and personal
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More control over my personal calendar and more time to be present with my family as my daughter begins her sophomore year in high school this year. So I'm so grateful to have the opportunity to create the balance that I need reporting for a wonderful leader in a very important part of the business. So I am grateful
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for the opportunities to support Kathy's vision and what's next in this next season and chapter of my professional journey.
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As I reflect on today's topics, I realize just how closely miggers what many business owners experience through change. Succession is not simply about stepping away, it's about planning thoughtfully, creating opportunities for others, and ensuring the mission, vision, and values that you've built continue to thrive
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as your role evolves. At that same spirit
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has guided Kiefer Women for more than 20 years. Our mission has always been bigger than one person, empowering women through advocacy, education, connections, and guidance
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Because of that strong foundation, I am confident in this program's future. Vanity Bryant has been a long, valued member of the Keeper Women team, and I'm excited to share that she will take on a more visible leadership role by leading our national webinar programming moving forward.
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Many of you know vanity through the partnerships, events, and initiatives she's helped bring to life across the country, and her passion for supporting women business owners, deep understanding of our mission and commitment to this community makes her a natural choice to continue delivering the meaningful content and connections that define Kiefer Women
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So today, our panel will explore the financial and operational aspects of succession planning, along with the personal side of legacy building, preparing the next generation, creating continuity, preserving values, and ensuring that we've
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continues to make an impact. With that, it is my pleasure to turn this over to my new leader that I'm happy about, Ms. Ms. Kathy O'Malley Kearney, to begin today's session. Thank you.
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Thank you, Rachel, and good afternoon, everyone. As Rachel mentioned, my name is Kathy O'Malley-Carney, and I am the Executive Vice President and National Head of Key Private Bank. I am so pleased to moderate today's conversation
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But before we begin, I want to take a moment to acknowledge Rachel and share how excited I am to have her joining my team. And as she mentioned, we call it coming home. Rachel has brought tremendous leadership
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energy and commitment to key for women, a program that I have supported and am passionate about for more than 20 years, so I love to see the work that she's done with Key for Women, and I know that she will bring
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Same passion and client focus to her new role with Key Private Bank.
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And in a similar line, today's topic is so important because ownership, Succession and legacy planning are deeply connected to the broader wealth conversation, focusing on strategies and family planning conversations
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that matter most to business owners.
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I am grateful to be joined by two of my colleagues who bring deep expertise to this conversation
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First, I welcome
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Kalima White, Estate Planning Advisor with Key Private Bank, and a former practicing attorney with more than 25 years of experience advising high net worth families, business owners on a variety of
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Issues related to estate trust and tax planning matters. Kalima helps our clients develop thoughtful, tax efficient strategies that align with
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long-term goals.
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And next, we welcome Karina Beal, Senior Director of Business Advisory Services with Key Family Wealth.
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Karina brings a strategic perspective on business ownership, enterprise value, governance, and transition planning
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Her work helps business owners think through the decisions and structures that can support continuity, protect value, and prepare a business for what comes next.
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Kalima and Karina will help us look at succession planning from both the personal and the business perspectives.
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Kalima has helped to frame the estate planning and legacy side of this work. And Karina helps us broaden that lens to include enterprise, operational and leadership considerations that are so vital to that transition as well.
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So with that, Karina
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Why don't you start us off
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When you hear the term business transition
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What does that mean to you? And why should business owners begin planning long before they're ready to step away?
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Thank you very much. I appreciate being here. Happy to be in front of all of you and give you a real life perspective as to what this stuff really means to you. And that's a great question to start out with. So I would position this best for those of you who are parents
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Succession and transition planning is often equated to the journey that we go along raising our children.
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You've brought something to life. You've created this
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brilliantly wonderful, flourishing entity and you are personally very invested in that entity. You want to see all that you've poured into that continue to be a positive and radiant piece long after
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after you. Your business is the exact same way
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When you think of your children moving on to their next chapters. I think for most of us, we don't want to just hand our kid off to anyone, cross our fingers, and hope it works out, right? We really want to make sure that we're positioning them
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For the right partner that's going to continue to support them, help them to grow, to continue to navigate the challenges in a meaningful and positive way. Business transition is that for your company
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is helping you make strategic decisions, invest in a foundational way so that there is an opportunity to continue that legacy forward in the same fashion you would while you were here long into future generations.
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That doesn't happen overnight. Just like raising our children is a labor of love that we invest decades into. Your business is the same, and your succession should not be something that you rush into. You will hear us
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talk a little bit more about this over the course of this conversation, but many of the things you will do to position your business for a successful transition take time.
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Sometimes that means it's finding the right people. Sometimes that means you're mitigating financial sandpits on your financial statements. Sometimes it means you're navigating revenue concentrations, low inventory turns
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A depressed market cycle in your industry
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Those alone can take months, sometimes years. You're going to hear Kalima talk a little bit later about some of the estate planning techniques that go hand in hand to bolster and support that exit beyond just the business
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Which also take other partners, accountants, attorneys, and their time is also something you need to budget for, and collaborating together is something that's an evolutionary process.
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Indeed.
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Great point. And, you know, I think that you call out life is full of surprises, right?
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And so we need to be prepared for some things that might not happen in the natural order that we anticipate, or an event that we might not have anticipated. So I'm going to take
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Karina, what you said a step further and asked Kalima
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How, you know, if an unexpected event occurs
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How does proactive planning help
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business owners, employees, family members
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Maintain that transition and preserve the long-term enterprise value.
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Yes, no, that is an excellent question, Kathy, because it goes into sort of what happens if I get hit by a bus tomorrow conversation, right? You know, and some business owners, they sort of have to hear this, you know, bluntly. It's really
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a retirement plan, it's about an emergency continuity plan, that every business owner needs, right? So, regardless of whether or not they're expecting to transition, you know, next year or 10 years from now
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But, you know, at minimum, I was thinking about sort of
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There are a few things that definitely need to be in place, right? So, first, an interim leadership plan
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Right? If you're not available tomorrow morning, who actually has the authority to make decisions
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Who can sign checks, who can, you know, access bank accounts, things of that nature, and have you communicated that plan. Because a lot of times, the issue is that all of this stuff is up here, you know, in the owner's mind, right? And so, you know, not only do you have to ensure that you've communicated, but you've given the people legal authority to do it as well, right?
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And so a second thing to always think about is really having a properly drafted and I'm going to say this again and again, a properly funded by sell agreement
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Right? I think a lot of business owners, they have heard of the term, you know, buy-sell agreement, but they don't always understand what it actually does. You know, right? So a properly drafted by seller agreement is essentially a contract
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You know, among the owners of the business, right, between the owners and the business, and that really establishes what happens to an owner's business interest when certain triggering events occur, like deaths or, you know, disability, divorce
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Things of that nature retirement. So you know the agreement really should answer several important questions, right? Like who can or who must buy the interest, you know who they can sell it to, how the business is valued. That is very important as well
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And so
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you know, having something unexpected like death
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happen and don't have… and not having these documents in place is… can be a big, huge issue, right? So, if I own 50% of a business, you know, with you, Kathy, and, you know, and I die without an effective buy-sell agreement, my 50% interest may pass according to my estate plan, and I don't want it to be
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Right? I don't… that's not what I really wanted to happen. And so I need to make sure I can avoid these sort of, you know, nightmare scenarios. And like I said, also to having the buy sell agreement funded, whether that's life insurance. I mean, it's a horrible situation to be in
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If a partner has to sort of come out of their pocket, you know, to fund and to be able to fund a buy-sell agreement as well. So that is something to, you know, to really think about. But also, too, having and making sure, you know, like I said, those estate planning documents
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go along with that buy-sell agreement, right? Making sure that you have your will, your revocable trust, your powers of attorney, your beneficiary designations, and your shareholder agreements and business operating agreements, that they all go in line or reviewed together
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You know, with your… because a lot of times, you know, like you said, Karina, you know, business owners, this is their baby. So they really need to put this, you know, this business in line with that, right? You're planning for your kids, you need to plan for your, you know, for your other kid, your business kid as well
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So, all of those things are, you know, very, very important to think about. On top of it, not only death is something that people think about. I've had business owners say, well, you know, I'll be dead, so I don't have to worry about that. But what about disability?
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That is something that we talk to our clients about all the time. Not only will you pass away, but you're more likely statistically to be disabled than you are to pass away. So making sure, you know, your powers of attorney and your revocable trust and all of those documents
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address what you want to do with your business as well. So, you know, I can go on and on, but making sure, like I said, the business continuity, having the key contracts together, your customer relations, having all of that information really communicated to your key people
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And so in making sure that when you're reviewing all your state's documents, they all go together. But as Parina said, in order to do that, you've got to plan in advance
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Great points, Kalima. So just to confirm, I heard three key things. First, know who your successor is and assure that they have the vital information they'll need to run the business
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for you or instead of you
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Yep.
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create a buy, sell, and fund it and make sure your estate plan is up to date. And the the great thing about planning all of those in advance is you can take as long as you need and work with your attorney and account to get that all set up.
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And do it slowly. You have as much time as you need and aren't rushed into to making any decisions so you can make the ones that would be right for you. So great, great actions, specific action.
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Good point.
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Exactly. And review those documents as well, right? So planning for them, it's great to have them in place, but every three to five years, I would say three, more closer to three reviewing those documents is very important too, because things change
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Okay, so those are the three best things we can do.
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Yep
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As with anything else, there are some common mistakes or pitfalls
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Karina
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What are those mistakes that we can help our listeners avoid when, you know, as they're thinking about potential succession or leadership changes down the road?
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You just you just said the word leadership.
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Many owners make the mistake of thinking that
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And at the risk of offending some of you, there is no one else who can do it as well as they can.
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So that often ends up causing more challenges than successes.
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The best-in-class, most valuable, and highly sought-after companies are ones that are not codependent on the owner.
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The most desirable aspect is a well staffed
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management team
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People should not only be aware of your strategic vision for the company, but they should be participating in the meaningful conversations you should be having on a regular basis about what's working, what's not working
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How does our sales team integrate with our finance team? How is our operations fitting into the grand scheme of our strategic vision? How are they complementing or detracting? And how are everyone's perspectives
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cohesively addressed
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Keeping things siloed in separate channels and not encouraging that communication is the number one mistake I see owners make.
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They keep it all super close to the vest.
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And they don't allow the people that you've hired to be the experts in their field and flourish in that role to the greater good of everyone
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The other aspect of common mistakes I see is you don't take the time to review things, both retrospectively and forward.
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for 25 years, I've been reviewing financial statements, and even if companies are 100, $200 million in enterprise value, many of them have never examined what the historical trend lines of their performance have been
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Doing so and doing so often every quarter perhaps will allow you the insights to know what is going off balance to the good or to the negative before
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You're reviewing it retrospectively after the year has closed, and you can't do anything to change those numbers for that year
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Having the idea of what the past has looked like will help you do a much better job
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out the future, which leads me to another common… I don't know that I'd call it a mistake, but something often overlooked, and that is having projections. Even a budget. A budget is short-term. Think of a budget as the next 12 months, or the rest of this year
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Forecasts extend beyond that. A forecast is the following 12, 24, 36 months.
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What would that look like?
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It's very hard to map that if you don't know where you've been
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So, mapping your historical trends
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projecting your future expectations and tracking the difference. Is a major tool in any business owner's pocket for not only operating efficiently, but preparing for an exit
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because your buyer, regardless if that buyer is an ESOP trustee, a family member, a management team, or a third outside party, they will all be examining those very same numbers and pricing that into your deal
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Okay, so what I hear you saying, you know, when you think strong leadership
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Absolutely
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Trends, you know, historical trends and future forecasts. That really sounds like good avoiding the pitfall of not having strong governance, right? Governance of the business.
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Absolutely
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Okay, so so that's foundational, and that's, you know, that's you want to avoid falling into those traps of working in the business, not on the business. And
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Okay, great. So
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As an owner is preparing for a transition or contemplating it, say, in the next 5 years, there are probably other things they can do that would actually either protect the value or increase the value of the business
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Karina, what are those steps that folks should be taking to make sure they get the most out of their business when they sell?
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That's a great question. And some of that harkens back to the things that Kalima has already touched on. I would say, first and foremost, get your documents in line.
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going to market, again, whether that's through an ESOP, a family transfer, inside sale, outside sale, make sure that your documents are up-to-date and accurate
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Coming to the table with a whole bunch of questions from the buyer and no answers isn't going to help your transaction in any type of exit. So having that continuity in place not only reassures them that you have been working on the business, not in it
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But it assures them that after you leave your period of transition is over, they have reliable people and information that are continuing to help them transition through that phase on their own
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The other piece that I would encourage every owner to really take a close look at is try to understand what your company looks like from the outside in
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So if you took a step back
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And you were to be examining your own company as a potential buyer, what sticks out to you
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Do you have
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revenue concentrations. How closely do you track your inventory? What is the coming trend in your industry, and are you prepared for it? AI is a great example. If you start to see that everyone in your industry is fulfilling purchase orders through AI
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Are you prepared for that? If they have automated phone systems, is that working in your industry, or is it a detractor? What are the potential disruptors? And can you create additional verticals and recurring revenue
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Another hugely impactful piece of a successful transaction are both of those facets. Having multiple vertical channels
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and having recurring revenue. Recurring revenue is a top driver of best in class multiples
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The other piece that I would encourage every owner to get very familiar with is your working capital
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Working capital is perhaps the second most heavily negotiated aspect of any transaction. Again, inside, outside, or otherwise. Many owners are not familiar with what their current working capital is
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Nor are they prepared to negotiate adequately for working capital target in a transition, and that can move your number by literally millions of dollars. And it often comes as a big surprise
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So I would encourage every owner to get very familiar with how that works.
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Great point. I love the visual of
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Looking at the business from the outside in when you're thinking about what this value looks like. So we'll flip that
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And Kalima
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Hmm.
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As owners are, you know, early in the planning stage, what conversations should they be having now
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to help ensure that their plan for succession, you know, their personal plan
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will align with their wealth goals and family dynamics or the legacy they want to leave.
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What should they be doing there? What question should they be asking, or conversations should they be having?
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No, that is definitely a good question. I like how it dovetailed into from what Karina was saying, talking about sort of the business planning because this question is sort of where the business planning and the wealth planning collide in a good way, right? Like you need to look at both of those things and
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You know, I think some of the first questions to ask is, you know, what does, you know, enough look like for me, right, as a business owner looking to, you know, to sell their business? Because before you start talking about selling a business, you really need to understand, you know
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What the business was supposed to accomplish in your life, right? I think sometimes, you know, and thinking about sort of, you know what would be sufficient for me and my family, you know, during the timeframe. So I think what Karina was talking about, you know, understanding sort of the value
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You know, aspects of your business, and then dovetailing that into, okay, you know, this is the value, this is what I can do to increase the value of my business, then what am I… you know, so now that I don't have the business anymore, you know, what type of analysis do I need to have in order to ensure that me and my family
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you know, can survive. I need to do some type of, you know, capital sufficiency analysis, or something like that. So if you need $10 million, you know, to fund your lifestyle and support your family, you know that if you are selling your business for $5 million, that's not going to work. So
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I think always understanding your numbers, your business value, but then also, too, the numbers that you need to be able to live the life that you want and working backwards from there is very important, right
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And so, you know, you have to basically, you know, see what your family needs and anticipates those needs as well. So you can try to really prioritize this highest you know
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Possible purchase price, right? But then too, I think what Karina was talking about was also depending on what the options that your family has, right? Because you were talking about the different transitions that you, you know can have. Sometimes you're not
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selling it to a third party. You know, you are transitioning it through the family, right? And so that means that now, when you're passing, you have a big ill liquid asset
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Right, so what are some of the things that you can help the family with? You know, is there some life insurance planning, you know, that's needed to be able, you know, to deal with the illiquidity when taxes are due? Things of that nature that, you know, definitely have to, you know, talk about
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And also, too, making sure, like you said, disowning it to a third party, you know, you may be in a situation, have to think about some things differently, but if you're transitioning it to, you know, to the next generation.
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I think Karina talked about sort of that communication that is definitely needed to be able to do that, you know, making sure that even though the kids work in the business now, is that something that they want to do for the rest of their lives? A lot of times they have a plan
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That you don't know about after you are no longer here, right? So that is definitely always something, you know, to think about. So I think putting all of those pieces and, you know, and parts together
00:28:37.000 --> 00:28:53.000
You know, is very important, the business part and the family part. And you cannot do it. I think Karina alluded to it, you know, earlier too without making sure you have all the right advisors in place, right? You're having your, you know your estate planning attorney
00:28:53.000 --> 00:29:06.000
An estate planning advisor, you know, like me on the wealth planning side, you know, having a CPA, your valuation professional, you know, making sure that you understand
00:29:06.000 --> 00:29:22.000
what you… what you have and what you need. I think those are sort of the two big questions, and, you know, and having advisors who can, you know, who can help you with that is definitely what you need to do, because if you are no longer
00:29:22.000 --> 00:29:32.000
You know, if you no longer have your illiquid business, but now you have, you know, cash and marketable securities, like, how does that dramatically change things?
00:29:32.000 --> 00:29:48.000
for you, right? Now that you've sold the business, how does that change things, you know, for your family and the goals that you have? You know, maybe you can do, you know, some more, you know, gifting. Maybe you, you know, if you had planned in advance, you could have done some, you know, gifting
00:29:48.000 --> 00:30:05.000
With regard to illiquid business interest that you were looking, you know, to sell, and get some discounting off of that. So, I think that… I think regardless of what we talk about and any of the specifics we talk about today, we are always going to mention planning in advance
00:30:05.000 --> 00:30:15.000
It gets you more options. It gets you, you know, more possibilities, it gets you more understanding about what you have. And so
00:30:15.000 --> 00:30:31.000
You know, I think that all of these, looking at it from the business side, you know, making sure that's operational, and then from the from the wealth planning side is, you know, where you need to be. So I'm going to stop pontificating there. Yes.
00:30:31.000 --> 00:30:32.000
Yeah.
00:30:32.000 --> 00:30:42.000
I'll just chime in real quick to dovetail on what you just said there. Planning in advance does give you time for those things. It also gives you time to choose the appropriate advisors.
00:30:42.000 --> 00:30:43.000
Yes, exactly.
00:30:43.000 --> 00:30:59.000
For example, if you are working with an accounting firm that's traditionally done your payroll and filed your taxes, and that's it. That is not the same accountant that you need running your pre-exit quality of earnings report
00:30:59.000 --> 00:31:00.000
Exactly.
00:31:00.000 --> 00:31:14.000
If you have an attorney that has helped your family draft your estate planning documents, that may not be the appropriate attorney to help you navigate a negotiation for an ESOP transaction and address that purchase agreement document
00:31:14.000 --> 00:31:29.000
Making sure that you've taken the time to appropriately staff your board of advisors in terms of your household as well as your business is something worth taking the time to do.
00:31:29.000 --> 00:31:30.000
Totally agree
00:31:30.000 --> 00:31:34.000
Great points, great points from both of you. And so I think we
00:31:34.000 --> 00:31:38.000
What we're hearing is that that transition, first of all
00:31:38.000 --> 00:31:48.000
doesn't take place in the same way, in every business. Sometimes it might be family, sometimes it might be a third party.
00:31:48.000 --> 00:31:52.000
And the estate plan is important.
00:31:52.000 --> 00:31:56.000
What are, and we know we need to choose the right advisors
00:31:56.000 --> 00:32:04.000
Kalima, what are the other legal or operational considerations that are frequently overlooked there?
00:32:04.000 --> 00:32:24.000
Yeah. No, that is a really important question because I think sort of foundationally, business owners only really truly think about what my business is worth, right? And that's a very important question to, you know, to buyers, to the family, to lenders, to everyone
00:32:24.000 --> 00:32:35.000
But from sort of a legal and estate planning perspective, you know, the one major and foundational thing everybody needs to know is, okay, who actually owns the business
00:32:35.000 --> 00:32:53.000
Right? And where are those documents? And I think Karina alluded to this, you know, a little earlier as well, right? I mean, that's a very, very basic question, but that is the first question that any estate planning attorney is going to, you know, start with
00:32:53.000 --> 00:33:06.000
Any good advisor is going to start with, right? Because it's not who everyone thinks on it. And a lot of times, too, you know especially with a
00:33:06.000 --> 00:33:22.000
generational time. I remember I had a client that we were working with, they were dentists, and they had a dental practice. It was three brothers, and they had a lot of real estate in their dental practice as well. And so they were trying to do estate planning for each of them
00:33:22.000 --> 00:33:25.000
But it was like, you
00:33:25.000 --> 00:33:45.000
One brother owned the four LLCs over here, and the other one, you know, owned the five over here, and they were saying, oh, well, we just want to, you know, split everything into a third. I'm like, well, looking at these documents, that's not what we have here, right? We don't have that each of you own a third.
00:33:45.000 --> 00:34:01.000
Each of you own pieces and parts, and we're going to have to ensure that those foundational documents are where you want them to be, right? So we're going to have to, you know, make some changes to ensure that those documents are where you, you know, need them to be, and that the interest
00:34:01.000 --> 00:34:18.000
You know that you all own. That one was a scary situation as well, because they all just, you know, they had no buy-sell agreements, they really had nothing that they were, you know, working through. So that was an interesting, you know, way to help them as well. But, you know, like I said, making sure that
00:34:18.000 --> 00:34:34.000
All of those documents are taken care of. And then, you know, said always, always, always making sure that your estate planning documents, you know, like your revocable trust, your financial power of attorney, all of those documents are in line
00:34:34.000 --> 00:34:47.000
with your business assets. And then two, like, if you sell your business as your business, then making sure you're reviewing those documents again with the changes in circumstances, you know, that you have. So, you know.
00:34:47.000 --> 00:34:59.000
Making sure that your foundational business documents are together. I think Karina had alluded it to it too as well with regard to your contracts for the business
00:34:59.000 --> 00:35:11.000
Right? Are, you know, are in line and then ensuring that all of that is dovetailing into your estate plan, you know, as well.
00:35:11.000 --> 00:35:27.000
I think that the review of those documents are really, really important and having that on a specific cadence as well, making sure that you review it at least every three to five years, but especially when there's a big life event happening
00:35:27.000 --> 00:35:28.000
That's
00:35:28.000 --> 00:35:34.000
I would add another piece to that as well. Things that people are often overlooking in terms of
00:35:34.000 --> 00:35:35.000
Yeah.
00:35:35.000 --> 00:35:42.000
legal and filing matters, the type of business structure you have can be incredibly impactful in how you exit.
00:35:42.000 --> 00:35:49.000
For example, you cannot do a 1042 within an ESOP if you're not a C Corp
00:35:49.000 --> 00:35:54.000
Right.
00:35:54.000 --> 00:35:55.000
Yes, yes.
00:35:55.000 --> 00:36:05.000
If you don't know what 1042 is, we should probably talk about that if you're thinking of an ESOP. Another piece is pre-exit tax planning. Again, I'll drop another nugget for those of you who don't know of it. There is a tax code provision called
00:36:05.000 --> 00:36:20.000
1202 QSDS Qualified Small Business Status that could potentially allow you to have an entirely tax-free sale someday. There are rules and requirements, one of which is you have to be a C Corp
00:36:20.000 --> 00:36:26.000
So if you're an S Corp or an LLC, it is worth understanding why
00:36:26.000 --> 00:36:44.000
And is that the most suitable form of business for you, not only operationally, but in terms of your desired succession and exit plan? Many of those, again, common theme here, require planning ahead, because in order to capitalize
00:36:44.000 --> 00:37:01.000
fully on those opportunities, there are rules, and some of those rules require how many years you have been operating as that type of entity. So, not often does it mean you can flip a switch at closing
00:37:01.000 --> 00:37:21.000
and have the full effect, those benefits available to you. It's something you need to look out ahead for. So don't just default to your form of business. It should be a deliberate decision, and again, something you've heard us say repeatedly, revisited to be sure it still makes sense as your business and the environment around us evolves.
00:37:21.000 --> 00:37:26.000
So I hear two important things
00:37:26.000 --> 00:37:27.000
Yep.
00:37:27.000 --> 00:37:41.000
between the two of you. The first is know who owns the business, which I think is a great question, particularly for family-owned businesses, right? It might not be just the person working in the business every day, 365 days a year
00:37:41.000 --> 00:37:47.000
But who are the owners and what is the plan? And secondly.
00:37:47.000 --> 00:37:58.000
What is the best entity to operate the business and transition the business? So finding that inflection point
00:37:58.000 --> 00:38:00.000
is essential. Fair
00:38:00.000 --> 00:38:01.000
Agreed.
00:38:01.000 --> 00:38:02.000
Okay, so
00:38:02.000 --> 00:38:04.000
Very fair, yep.
00:38:04.000 --> 00:38:17.000
Lots about operation and planning. But as the old saying goes, you know, culture can be the most important creator of value in a business.
00:38:17.000 --> 00:38:30.000
Karina, how do you preserve a company's culture and mission and maybe a legacy that's been built over generations while empowering new leadership to move forward at the same time?
00:38:30.000 --> 00:38:44.000
So for those of you who've never heard of it, I would encourage everyone, literally everyone on this call that owns a business to get really familiar with a book called Traction by Gino Wickman
00:38:44.000 --> 00:38:46.000
It is a
00:38:46.000 --> 00:38:56.000
extremely easy read, very common sense written type of way to access a system called EOS
00:38:56.000 --> 00:39:07.000
EOS will allow you to do exactly what you've just described, Kathy. It changes your perspective as a business owner to, again, viewing it from the outside.
00:39:07.000 --> 00:39:22.000
How would a prospective buyer, again, whether that's an ESOP trustee, a management team, an outside buyer, family member, what have you, what's going to stand out to them and how do we deliver a consistent, repeatable experience?
00:39:22.000 --> 00:39:27.000
It starts with developing a strategic vision.
00:39:27.000 --> 00:39:34.000
after a couple of decades of doing this, you'd think that there's nothing that surprises me, but this is something that consistently does.
00:39:34.000 --> 00:39:44.000
Nearly all of the enterprises that I get in front of to work with, which are all tremendously successful and valuable businesses
00:39:44.000 --> 00:39:45.000
don't have one
00:39:45.000 --> 00:39:54.000
When I ask what's the strategic vision of the company, how do you differentiate yourselves from your competitors in the industry?
00:39:54.000 --> 00:39:56.000
It's usually crickets.
00:39:56.000 --> 00:40:09.000
starting with an understanding of what you as the owner, are trying to accomplish. What's your passion is? How do you want to be seen? What is your brand?
00:40:09.000 --> 00:40:20.000
starts with that. You can't create a culture without knowing what it is you're trying to create. It's like a roadmap with no roads. You're just sort of
00:40:20.000 --> 00:40:31.000
flying by the seat of your pants day to day, hoping that it works out. This is, again, where you start to make strategic decisions about how you go to market.
00:40:31.000 --> 00:40:49.000
How you engage your clients? How do your employees interact with each other? How does management interact with those employees? And how does management interact with you? All of these things build up in a systematic way to create, again, the best-in-class sorts of companies
00:40:49.000 --> 00:41:06.000
that are firing on all levels, because the culture is one of integration, not separation. And everyone knows their role, and they're compensated appropriately for it. I would consider every owner, when you evaluate the type of culture you want
00:41:06.000 --> 00:41:21.000
To consider the statistic that ESOPs are particularly successful where appropriate because of the culture and mindset that they can create. You do not have to go through an ESOP as a succession plan to create
00:41:21.000 --> 00:41:30.000
a like-minded owner mentality that creates a powerful culture driving forward on all cylinders.
00:41:30.000 --> 00:41:49.000
Consider things like phantom stock or profit sharing plans where employees' compensation at various levels grows with the company's success. And success is tied to the vision that you have created and consistently communicated.
00:41:49.000 --> 00:41:54.000
Wonderful. So before we move on, repeat the name of the book and the author for our listeners.
00:41:54.000 --> 00:42:00.000
Traction by Gino Wickman
00:42:00.000 --> 00:42:16.000
Okay, great. So in a few minutes, we're going to move on to some questions from our listeners. But before we wrap up, we want to, I want to give our listeners one piece of actionable advice here
00:42:16.000 --> 00:42:23.000
And so, Karina, I'm going to start with you, and then Kalima, you can take it from there.
00:42:23.000 --> 00:42:33.000
If we have business owners participating with us today who don't plan to sell their business or transition it for five or maybe even 10 years
00:42:33.000 --> 00:42:47.000
What is one action that they should consider taking in the next 90 days to lay that strong foundation for that successful transition 10 years out?
00:42:47.000 --> 00:43:08.000
That's the ideal time, believe it or not. So when you have a minimum of two years, but preferably, we love it when we have these conversations with owners who are 3 to 5 years out. That's the sweet spot, you guys, that gives you enough time to make meaningful changes in a very intentional way
00:43:08.000 --> 00:43:12.000
Without the pressures of doing it at the last minute
00:43:12.000 --> 00:43:18.000
if you were to do nothing else, and I'm gonna steal a little bit of Kalima's thunder here.
00:43:18.000 --> 00:43:22.000
get an operating agreement in place because
00:43:22.000 --> 00:43:23.000
Exactly.
00:43:23.000 --> 00:43:44.000
Death is not… it's… this sounds terrible, but I prefer that you die than you become incapacitated. Death is pretty straightforward. It's when you're still with us, and there's a vacuum at the operating entity level that cannot be filled is when you get into real
00:43:44.000 --> 00:43:45.000
trouble
00:43:45.000 --> 00:43:57.000
have an operating agreement talks about what happens within the business when the person who is normally in control isn't able to be
00:43:57.000 --> 00:43:59.000
But it's still with us
00:43:59.000 --> 00:44:16.000
So no, again, who's signing payroll, who has access to the account? Who can approve customer contracts? Who can make a purchase order from suppliers? There needs to be an operating level that the enterprise can continue to execute upon
00:44:16.000 --> 00:44:28.000
in the short term and unexpected instance that you, as the owner cannot and make sure that shareholder or operating agreement matches
00:44:28.000 --> 00:44:30.000
Your estate documents
00:44:30.000 --> 00:44:32.000
Hey, Kalima.
00:44:32.000 --> 00:44:49.000
Exactly, no, I mean, it dovetails right into basically what I had to say on the personal planning side, you know, making sure whatever you have in your operating agreements and your business agreements are not contrary to what your estate plan says
00:44:49.000 --> 00:44:50.000
Right
00:44:50.000 --> 00:45:05.000
Right? And so, you know, now you're in a situation of, I mean, that is the biggest way to, you know, what would I say, start the lawyer retirement fund to get into legal battle, right, with the family and business owners
00:45:05.000 --> 00:45:20.000
Right? Because now you have these, you know, contrary documents, and now everybody thinks that they are, you know, in control of this or that. So being really clear about these documents are very important, and making sure, like I said, that you are
00:45:20.000 --> 00:45:37.000
Reviewing them every 3 to 5 years, you know, making sure that when you do have your buy-sell agreement, you know, they are… they are funded, that they are, you know, agreements that if something were to happen, you know, to you in disability
00:45:37.000 --> 00:45:46.000
You know, or to pass away, that these things, these documents and, you know, these things pop on without you having to do anything
00:45:46.000 --> 00:46:03.000
Right? They just, you know, they just start without you having to do anything. So I think that that is, you know, the most important thing to do, and you can't do that without having a team, right? You need a team of advisors to be able to help you with, you know, with these situations, and a wealth planner
00:46:03.000 --> 00:46:21.000
Is someone that you really need, you know, as a business owner, you know, making sure that you have, you know, your, you know, estate planner, that you're working with, and your CPA, and having them all know about, you know, what your business looks like and what your goals are for the future
00:46:21.000 --> 00:46:36.000
You know, as well. So, you know, just making sure that all of your things are in line, and you review them is very important. So those were the things I would say, you know, to take action throughout these next, you know, 5 to 10 years.
00:46:36.000 --> 00:46:52.000
Great. So the takeaway is in the next 90 days. And we could have probably accomplish it by starting with one phone call.
00:46:52.000 --> 00:46:53.000
Exactly.
00:46:53.000 --> 00:46:56.000
To either create or update your operating agreement and your estate plan. So that's our homework and our takeaway. Excellent ladies. So Rachel
00:46:56.000 --> 00:46:59.000
I think you have some information for us, right?
00:46:59.000 --> 00:47:16.000
Yes, absolutely. And what a great conversation. I definitely want to continue this as we move into our Q&A portion. I don't see any questions out there yet. We do have a couple that came in before the session that Kathy and team will go through, but if you have some questions, make sure you put those in the chat
00:47:16.000 --> 00:47:38.000
is they'll get to as many as we can during the program. So please, please, please submit those and get them answered. Also, for Keeper Women, if you are not currently a Kiefer Women member, you can join in a variety of ways by scanning the QR code on your screen to receive upcoming event invitations, insights, updates directly to your inbox
00:47:38.000 --> 00:47:48.000
You can also go to key.com/join, K, the number 4W. So if Kathy, take us away to lead our Q&A.
00:47:48.000 --> 00:48:08.000
Great. Well, a couple questions we have here from participants. So the first is, how do I know whether passing my business to family, selling to employees or selling to an outside buyer is the right path for me
00:48:08.000 --> 00:48:11.000
I'll take it. So the
00:48:11.000 --> 00:48:15.000
It depends first and foremost, on what your goals are.
00:48:15.000 --> 00:48:27.000
So I'll give you an example. When I have an owner come to me and say, Hey, I really don't want to pay any taxes, so I like the idea of doing this ESOP thing
00:48:27.000 --> 00:48:38.000
I can tell you 90% of the time they're not going ESOP because their goals don't align with the purpose of the ESOP
00:48:38.000 --> 00:48:55.000
So spending some time contemplating what's most important for you. I had a couple of brothers a decade or so ago who were shockingly the fourth generation in a family business, but neither of them had ever married or had kids, and so there wasn't a fifth generation
00:48:55.000 --> 00:49:11.000
Completely honestly, I can't imagine it would have worked successfully even if there were, because they never get that far. But they had a goal of preserving the name of the business. That was, believe it or not, their number one priority.
00:49:11.000 --> 00:49:27.000
And they wanted to know, how could they succeed the business preserving that name. For some it's their management team like, hey, these people have worked really hard to get the company where it is. They're the experts, and I want to make sure they're protected
00:49:27.000 --> 00:49:34.000
Sometimes it's very simply, I want max value. I want the most money that I can possibly get.
00:49:34.000 --> 00:49:45.000
How do I do that? So starting with real thought and reflection about what your priorities are for the business and personally
00:49:45.000 --> 00:50:01.000
will naturally lead you to a path of elimination. There are 8 different ways to exit your business. Some will naturally fall away because they don't apply. If you don't have any family in the business, or who's interested, clearly that family transfer's not on the table for you
00:50:01.000 --> 00:50:16.000
But knowing what the options are, and not defaulting. I've heard story after story of folks who have simply defaulted to an exit because that's all they knew.
00:50:16.000 --> 00:50:32.000
Because their buddy at the golf course sold two years ago for 10 times, so they're gonna sell too and hopefully get 10 times. Or, like that same story, it's always been passed down generationally, so we're gonna do that too, because we don't know what else our options are.
00:50:32.000 --> 00:50:45.000
Do not default. Understand what the options are, the pros, the cons, the math, and the process of each one, and how do those align with your goals and priorities. That's how you'll know.
00:50:45.000 --> 00:50:48.000
So along that
00:50:48.000 --> 00:50:51.000
Along that line, what if
00:50:51.000 --> 00:50:56.000
an owner knows who their intended successor is.
00:50:56.000 --> 00:50:57.000
But
00:50:57.000 --> 00:51:02.000
As this listener asks, that successor is not yet ready
00:51:02.000 --> 00:51:04.000
What should they be doing
00:51:04.000 --> 00:51:20.000
So, not yet ready in is two facets, not yet ready in terms of they don't have the money to buy it from you is very different from they're not ready to take over that role yet. And both are equally as important
00:51:20.000 --> 00:51:25.000
The first one is an easier fix, believe it or not
00:51:25.000 --> 00:51:38.000
that person should be in communication with a lending banker. They should have the perspective again, multiple perspectives in how you assess your your enterprise. One of them is through the eyes of a lender
00:51:38.000 --> 00:51:56.000
If the company is a great company, but can't be lent against, your buyer is not going to have the capital to buy the business from you. So having a touch base with your lender about what is the opportunity for a buyer to obtain capital to purchase this from me
00:51:56.000 --> 00:52:11.000
Whether that's inside or outside, is a conversation you should not be afraid to have. Many owners shy away from that because they're afraid that, oh my gosh, if I have my lender look too closely, they might not renew my line
00:52:11.000 --> 00:52:28.000
it doesn't work that way, guys. That is not the perspective. Your lender is your friend, and should be a business partner to you. They will give you very honest insight and feedback about how to structure your business so that it is optimal for lending.
00:52:28.000 --> 00:52:44.000
They will also give your potential buyer insights as to how to prepare. Will they have to sign a personal guarantee? How much money might they have to put down? If they're not financially ready, having these conversations early allows them to personally
00:52:44.000 --> 00:52:51.000
plan and prepare to be ready. From a role standpoint, this is where communication is critical.
00:52:51.000 --> 00:53:08.000
have them sit side by side with you, talk through how you make decisions. Listen as you have conversations with clients. Difficult conversations with employees, suppliers. Have them walk in the shadow of your shoes for a time
00:53:08.000 --> 00:53:25.000
So that they get the perspectives that's necessary. Make sure they understand what your purchasing manager dust, what your HR person does, what's your sales leader does, even to some degree, what's your CFO or bookkeeper is doing and why?
00:53:25.000 --> 00:53:30.000
Having that holistic view is what's going to prepare them to be ready.
00:53:30.000 --> 00:53:32.000
Good
00:53:32.000 --> 00:53:33.000
One point
00:53:33.000 --> 00:53:35.000
So
00:53:35.000 --> 00:53:49.000
If most of this person is asking my personal wealth is tied up in my business, how should I think about creating liquidity before a transition or exit
00:53:49.000 --> 00:53:52.000
Malima, do you want to do this or should I field this?
00:53:52.000 --> 00:53:55.000
Yeah
00:53:55.000 --> 00:53:56.000
Okay, so
00:53:56.000 --> 00:53:59.000
Yeah, no, you could go ahead, that's fine. Yeah, I'll dovetail into it.
00:53:59.000 --> 00:54:06.000
There is something, this is the most commonly used practice to create interim liquidity, and it's called a recap.
00:54:06.000 --> 00:54:22.000
So for concentrated positions of ownership, which is most business owners. This is where your lending partner is your friend. There is opportunity. Think of it kind of as drawing equity out of your home, right? You know that your house
00:54:22.000 --> 00:54:38.000
is worth something on the market. And you can't just sell a quarter of your house, but you can get an equity line that is leveraged against the holistic value of your home, and then you can use that money
00:54:38.000 --> 00:54:55.000
to reinvest back into your home and improve it, or you can use that money to take it outside the business and go on a family vacation, or invest it in the stock market for some arbitrage. Your business is the same thing with a recap.
00:54:55.000 --> 00:55:12.000
A recap is essentially drawing the equity that you have invested in your firm out of it, and you can use that to, again, reinvest in the growth of the company, or you can use it just to take some of, as they call it, chips off the table in the concentrated asset you have with your business.
00:55:12.000 --> 00:55:16.000
The other piece, you can create liquidity, which
00:55:16.000 --> 00:55:33.000
Sounds a little scary at first, but hear me out. Is there are capital partners who invest in minority positions of your business, non-controlling positions where they are silent capital partners only. We often call this slow capital
00:55:33.000 --> 00:55:45.000
Think of them as I pick on the Scripps family here in Cincinnati, for example. The Scripps family, multibillion dollar, multi-generational legacy of wealth.
00:55:45.000 --> 00:55:50.000
there's only so many stocks and bonds that that family can buy.
00:55:50.000 --> 00:56:05.000
At some point, they start diversifying their investments into direct private businesses, just like yours. There are firms that represent those families that select which businesses they're going to invest in
00:56:05.000 --> 00:56:17.000
They don't call the shots. They don't make decisions. They see you as a diversified part of their portfolio that often returns greater upside than traditional investments do.
00:56:17.000 --> 00:56:27.000
Those can give you, again, some liquidity and partial monetization before you have to exit entirely.
00:56:27.000 --> 00:56:28.000
Very good points
00:56:28.000 --> 00:56:32.000
Good, good. I think the analogy to the home equity loan is interesting. Kalima, did you have a comment
00:56:32.000 --> 00:56:47.000
Yeah, no, I mean, I think that was very good points that Karina made. And I think it just dovetails into, you know, into what we've been saying about how many different options that you have if you plan in advance
00:56:47.000 --> 00:57:03.000
Right? And so, and if you start thinking about these things, right, and the liquidity options that you have if you plan in advance and if you actually have a banker that you're working with to grow your business and then when
00:57:03.000 --> 00:57:20.000
You know, when you are then ready to exit, the other options that you have with regard to, you know, income tax reduction, that you have with regard to estate tax, you know, reduction by planning in advance with trust. And so, I mean, I think the name of this game, and I think I said it before, that really, truly
00:57:20.000 --> 00:57:33.000
sitting down with the advisors and planning way before you are, you know, thinking about a transition, or something happens to you, is where you need to be. So I hope that's what everybody takes away from this.
00:57:33.000 --> 00:57:35.000
Great
00:57:35.000 --> 00:57:50.000
Well, I see that we are approaching the top of the hour, Rachel, and what I would suggest to callers is if you have other questions, feel free to reach out. We will be happy to follow up with you
00:57:50.000 --> 00:57:52.000
directly
00:57:52.000 --> 00:57:56.000
But Rachel, I will. I will turn it over to you so we can conclude and end on time.
00:57:56.000 --> 00:58:16.000
Yes, absolutely. And feel free to send those emails over directly to our contacts connecting on LinkedIn or to our key for women at keybank.com mailbox. So we want to thank everyone for joining this thoughtful, insightful conversation. I know I learned a lot, many takeaways
00:58:16.000 --> 00:58:32.000
But appreciate you all joining today. So thank you, Kathy, Karina, and Kalima for sharing. And as my final webinar in my Key for Women role, I want to express how grateful I am for this community to support a program to build on advocacy, connections, and empowerment
00:58:32.000 --> 00:58:50.000
I had to leave this role with a deep appreciation of what we've built this together. We've really done this together, brick by brick, and I'm excited for what's ahead, so I'll leave you with this. Legacy is not what you leave behind. It is what we make possible for others to continue
00:58:50.000 --> 00:58:57.000
Thank you for everyone being here today. We look forward to seeing you again soon. Take care.
Whether you’re planning to pass your business to the next generation, preparing for a future sale, developing new leaders, or simply looking ahead, business transitions require a thoughtful and well-defined strategy.
Join Cathy O’Malley Kearney, National Head of Key Private Bank, for a dynamic panel discussion featuring accomplished business leaders who will share insights on succession planning, preserving business value, maintaining continuity, and building a legacy.
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- Strategies for transferring leadership and preserving company culture
- How accessing capital and investing in strategic growth can strengthen your business valuation
- Common pitfalls business owners should avoid
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