The number of Hispanic-owned businesses is increasing at more than twice the rate of the national average. Research from MassMutual's Business Owner Perspectives Study showed that 80 percent of Latino business owners will pass their business on to a family member – most often a child. However, 37 percent of those individuals said their chosen successor may not even know about this succession plan.
Over the years, ALPFA and MassMutual have worked together to help Latino small business owners make smart financial decisions for a more secure future. As the ALPFA Convention is hosted here in Dallas, David Hufnagel, Latino Markets Director at MassMutual, provides the following tips to help ensure a successful succession at ALPFA national convention:
1. Determine who would take over the business
Have meaningful discussions with any family members or employees you intend to name as successors of your business and communicate often what they can expect. This will make sure they share your passion and have a genuine desire to keep in running successfully.
2. Be sure you have a properly funded buy-sell agreement in place
A buy-sell agreement can be designed to protect your business from the five D's – death, disability, divorce, departure, and disqualification. For example, without a buy-sell agreement, upon the death or disability of a business owner, the business, or portions of it, may need to be sold in order to pay the surviving owners for their share of the business, estate taxes, and/or business operating expenses. If a buy-sell agreement is in place, it's important to make sure that it's funded in accordance with the current value of the business; otherwise it won't accomplish what you intended. To help ensure that your buy-sell agreement continues to meet the needs of the business, it should be reviewed at least every three years.
3. Make sure you have a coordinated team of advisors working with you
You need a team of advisors, which may include your accountant, attorney, financial professional, property and casualty agent, and banker, to effectively manage and protect your business interests. That's why it's important to appoint a "quarterback" for your advisory team. One who will bring the best thinking of all your advisors together to help ensure they are all working in concert with the best interest of your business in mind.
At MassMutual our goal is to help you stay focused on the task at hand – running your business. We recognize the challenges you face and are equipped to help you prepare for the future with more confidence. In fact, we have financial professionals who hold the Certified Family Business Specialist designation and are trained and certified to work specifically with family-business owners like you.