Positioning for the future requires a strategic mindset and a commitment to building a foundation that can withstand the tests of time. In the fast-paced world of business, it’s easy to get caught up in the day-to-day operations, but true success lies in working on your business, not just in it. By focusing on key pillars like strategic vision, governance, buy-sell agreements and estate tax planning readiness, businesses owners can ensure they are well-positioned for long-term success.
A Unified Vision
One of the first steps in positioning for the future is establishing a strategic unified vision and culture. This involves ensuring that the leadership team shares a common vision for the company’s future. In today’s business landscape where leadership may consist of multiple stakeholders that includes siblings, cousins or non-family members, maintaining a unified vision can not only be challenging but is also essential. Regular investment in team-building activities and off-site retreats can help foster alignment and cohesion among leaders. Additionally, a focus on leveraging people through initiatives like safety protocols and professional development programs can strengthen the company culture and drive sustainable growth.
Proactive Positioning
Similar to a unified vision, strong governance is a critical component of future positioning. A well-defined governance structure enables businesses to make crucial decisions and execute strategic initiatives with ease. This includes establishing clear protocols for capital management, like determining how purchases and sales are approved, as well as outlining processes for profit distribution, capital retention and debt financing. Buy-sell agreements are an integral part of governance and provide guidelines for the buying and selling of ownership interests in the event of death, divorce, disability or departure of an owner. By addressing these situations proactively, business owners are helping to mitigate potential conflicts and ensure continuity in ownership and operations.
Thinking Ahead
Estate tax planning readiness is essential for businesses looking to transition ownership to the next generation while managing tax liabilities. The federal estate tax exemption is $13.6 million per person for 2024. Federal exemptions were increased in 2018 and are scheduled to expire at the end of 2025. The exemption will be revised to the $5 million limit, adjusted for inflation from 2017, estimated to be roughly $7 million. Without a continuation by congress, the exemption will impact the families of those who pass away with an estate greater than that exemption level. Because of this, it’s crucial to anticipate these changes and plan accordingly.
This may involve strategies such as transferring ownership to the next generation in advance, utilizing valuation discounts or structuring ownership to maintain control regardless of a minority ownership while minimizing tax exposure. Adequate funding readiness is also vital, whether through life insurance policies, cash reserves or financing options to ensure liquidity for estate tax obligations without compromising financial stability. Non-key business asset sales can also be considered to generate additional liquidity without impacting core operations.
Positioning for the future requires a proactive approach to building a resilient foundation that can support long-term success. By focusing on strategic vision, strong governance, buy-sell agreements and estate tax planning readiness, businesses can navigate the complexities of the evolving business landscape and ensure continuity in ownership and operations for generations to come. Investing time and resources into these key pillars today can pay dividends in the future, enabling businesses to thrive in an ever-changing world.
Daryl Timmerman is a senior animal ag lending specialist – swine for Compeer Financial.
