Left, Lee and Terry Resnick, partners in Resnick Succession Group (formerly Resnick Associates), speaking at their education session “Assuring the Successful Continuation of Your Business,” at The ARA Show™ 2023 in Orlando.
At its very heart, the rental industry is comprised of many family businesses, with the next generation often taking over at some point in the future. It is important to put all of the necessary planning in place to prepare for that transition, even if it is in the distant future, because life can change at any time.
Rental Management recently spoke with Lee and Terry Resnick, partners in Resnick Succession Group (formerly Resnick Associates), a nationally recognized business succession, estate planning, and life insurance advisory and implementation planning firm with offices in Philadelphia and Kansas City, to learn more about the necessary steps to take when going through the succession planning process. An edited version of that conversation follows.
Rental Management: Is there an ideal time frame for starting the succession planning process?
Lee and Terry Resnick: Now. Be proactive in your business succession and estate planning. Regardless if you’re planning to sell, a plan should always be in place in the event something unforeseen happens. The pandemic was an ‘uncontrollable’ and forced everyone to acclimate to a ‘new normal’ and shined even a brighter light on the critical importance for business owners to get their planning completed and completed properly.
Rental Management: What questions should rental business owners be asking as they begin the succession planning process?
Resnicks: The time frame they realistically want to exit the business. A question that often isn’t analyzed enough — even if I want to sell my business — is does it make fiscal sense? Am I better served having key employees run it, scale back my time and maintain cash flow?
Rental Management: What are some common themes you have been seeing within the rental industry as well as with other industries you work with?
Resnicks: One, almost every business owner has ‘something’ in place when it comes to business succession, estate planning and life insurance implementation. And, two, too high a percentage of those business owners don’t fully understand what actually is in place, although many incorrectly think they do. The fact that they’ve taken the initiative to implement planning is to be commended, however, not knowing exactly what’s in place can be, and is often, problematic. Some of those problems include the danger of paying more in taxes that could have been legally avoided with proper planning, not transitioning businesses in a seamless manner and the greatest blow of all, losing the business and the corresponding fallout among family members. No business owner has a goal to end up with these results, however too many do.
Rental Management: What are the biggest challenges you see with rental businesses and succession planning?
Resnicks: Procrastination, not knowing a realistic value of their business, and not maintaining a current and comprehensive plan.
Once you’re no longer here, the business
and family fallout will be left for others to deal with.
Rental Management: Who should rental business owners consult as they go through the succession planning process?
Resnicks: Rental business owners should contact and consult with a business succession/liquidity planning firm, their accountant/valuation specialist, and their attorney.
Rental Management: What are some common mistakes owners make?
Resnicks: Not addressing current planning to confirm that it is established in a manner that best meets your overall objectives. Do not just assume that it does. Quality planning will provide peace of mind that your business, nonbusiness assets and family are protected. It is often difficult to focus on these topics, but they cannot be pushed aside. There are many items that can take a business owner out of the game and they must be focused on with the same diligence and resolve a business owner has in running their company. Many business owners have every intention of addressing these issues but many never do. Once you’re no longer here, the business and family fallout will be left for others to deal with. Additional common mistakes include procrastinating, not updating their planning and not working with specialists.
Rental Management: What options are available to the rental business owner if there is not a person in the operation (family member or employee) who is equipped to run the business after the owner retires?
Resnicks: Other options for owners include an outside sale or to be acquired by a public company.
Rental Management: What are key differences between family succession and employee succession, and how should each be approached differently?
Resnicks: A lot of families deal with active and inactive family members. Does the parental level of ownership want Fair Market Value (FMV)? Will they gift some or all of the business to the next generation? Employee succession is usually accomplished via an Employee Stock Ownership Plan (ESOP) as it’s very rare for a group of employees to have the financial wherewithal to purchase a business. Often the owner ends up financing their own buyout.
Rental Management: Do you have any final words of advice for rental stores who are going through the succession planning process?
Resnicks: Take time to think about the big picture. What are your goals for your business and family? Can you say to yourself that you are 100 percent certain that you have legal documents that accomplish your goals in the manner you want? Can you say to yourself that the valuation of your company will absolutely satisfy the Internal Revenue Service (IRS) in the event of an audit? Can you say to yourself that your liquidity planning is sufficient and structured properly to avoid all taxation? These are just a few of the big picture items that must be addressed correctly. u
Lee and Terry Resnick presented the education session, “Assuring the Successful Continuation of Your Business,” at The ARA Show 2023 in Orlando. For more information, visit resnicksg.com, or contact Lee Resnick at lee.resnick@resnicksg.com or 913-681-5454 and Terry Resnick at terry.resnick@resnicksg.com or 484-879-4674.