Succession planning for Hispanic businesses
Claudia Minaya
To better understand what's driving of one of the fastest-growing segments of the small business sector, Bank of America surveyed more than 300 Hispanic entrepreneurs across the nation to identify their motivations, aspirations and concerns.
A strong majority of Hispanic business owners anticipated increased revenue and growth in 2019. They are ramping up efforts to bring on new staff in a tight labor market. With unemployment in the Worcester area sitting at 3.6 percent as of February, competition for talent is fierce, with no signs of easing up any time soon. Regardless, the growth-minded approach of Hispanic business owners persists.
According to our third annual Bank of America Hispanic Small Business Owner Spotlight, 79 percent of Hispanic entrepreneurs plan to grow their business over five years, surpassing non-Hispanic peers by 24 percentage points.
Reflecting on their career paths, more than one-third of Hispanic entrepreneurs say their business has grown beyond what they originally envisioned. Many Hispanic business owners see the long-term growth of their business as a multi-generational asset, with 38 percent intending to pass their business on to their children.
One often-overlooked step in ensuring the future of a business is to create a business succession plan – which is especially significant for family-owned firms. While every business and family situation is unique, here a few key tips to help get started with succession planning.
Tip #1: One size does not fit all
The planning process should take into account a wide range of dynamic variables including roles, relationships and skills, personal goals and expectations, health and financial circumstances, market conditions, and the economic climate.
The transfer of ownership within a family can come with a number of personal and business challenges – especially when family members are employees, partners or co-owners. It requires the current owner (generally a parent) be willing to cede some form of control to the new owner (generally a child or children).
This includes the process of selecting the best person to be in control. Proactive business succession planning not only helps in the process of identifying potential family successors, but it facilitates and prepares them to take over the business.
Tip #2: Consider the financials
Key financial issues must be considered in the case of transfers to family members. One of the first considerations is the impact on the current business owners' wealth and cash flow. If the company is transferred by gift, be sure to understand the implications of any relevant gift taxes.
Tip #3: Write out the plan
The plan itself will certainly take time to develop, but the upfront effort is important to ensure a meaningful transition meets the best interests and needs of the business, the current owner and heirs.
Taken together, these tips will allow business owners themselves to proactively decide upon the type of transaction, the type of tax and the timing of business succession – rather than allowing life events, liquidity needs or the tax code to decide for them.
Claudia Minaya is a relationship manager for Bank of America's financial center on Grafton Street in Worcester.
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