Depending on purpose of valuation, costs can vary significantly. Less complicated valuations done for planning purposes can be very affordable.

Some family business owners value business every year as part of their strategic planning process. Others use valuation as a means for determining performance based compensation for key executives (phantom stock) rather than choosing to dilute ownership of stock to a non family key executive.

3. Funding is often a hidden or non recognized cost of succession planning.

It is important to understand that business may need to grow significantly in order to pay transition costs which include taxes, insurance, professional advisors, setting up trusts and purchasing business stock. Or, funds that would be available for expansion or to pay out to family will have to be retained in business for transition. Either way, planning for this cash flow requirement will ease transition.

A good rule of thumb is that business needs to grow by at least 20 percent more than normal growth pattern to offset costs of succession without disrupting profitability and cash flow of business.

First, it is a way to honor family (parents or grandparents) who founded a successful business.

The FF can be used to develop a wide range of community-focused improvement initiatives – such as a scholarship program for worthy students or paying for cost of a teacher to maintain and/or upgrade their teaching skills.

One FF awarded a $250 gift certificate to an office supply company for "teacher of year" – so teacher could supplement classroom supplies without having to pay for these supplies with their own money. The FF can coordinate and do charitable work of business. The FF can be a great PR tool for business and it can also provide employment for a family member.

And yes, set up correctly, FF is tax deductible.

Start an ancillary business

Another successful strategy we recommend is to start an ancillary business.

For example, a family business that is in warehouse and distribution business can consider "outsourcing" delivery of their product to a family member. Now that family member has nucleus of a "contract delivery" business and can promote and sell that service to other businesses. Another client had a daughter who became a CPA. The business could not afford to hire her as a CFO or comptroller – but instead family business became her first client as she set up her accounting and book keeping service!

If you would like to discuss these and other business building strategies – we would be delighted to hear from you!