February 4, 2023
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Patel: Time is ripe for succession planning


By Jasleen Patel

In order to manage your winery properly, you likely wear many hats to ensure the business runs smoothly. This includes planning new promotions, tours and shipping deadlines across the country. With all of these stressors, it can be hard to look beyond the next day, let alone the next year.

But have you considered the future of your winery when you are no longer in charge? Planning the next steps for your company helps ensure stability for your brand and its stakeholders and can also provide a source of income for your family. By outlining next steps through succession planning, you can stay ahead of the competition and maintain the legacy of your family business.

Creating a succession plan is about protecting the future of your winery and ensuring there are strategies in place for the business to continue to realize its value even after you exit. Rather than reacting to external circumstances, such as retirement or sudden disability, winery owners can make proactive decisions with a detailed transition plan, whether you’re planning to leave your business to a family member, sell or liquidate.

Five key ingredients for succession planning:

A capable successor. As early as possible, it’s important to identify an eligible successor with good leadership qualities and business sense to take over the winery when current management exits. Your successor may be a family member or an employee; we recommend thinking this through now and having the necessary conversations to know whether you’re writing a family-based or an employee-based succession plan.

Personal financial planning. Your post-ownership years will bring a fair share of excitement and challenges. In order to have a smooth transition, winery owners should consider key lifestyle choices in retirement. Who will continue to receive reimbursement? How will the buyout of your ownership interests be financed? Remember that timing of payments is crucial, and that the ownership transaction may change your life insurance needs as well.

An estate plan. The amount of estate tax owed and when it’s due are key elements in planning for liquidity. Make sure you tailor your estate plan accordingly. You may wish to control the timing or amount of estate distribution through trusts, gifting or other tax-saving protective methods. Though it may seem premature, it is also important to consistently update living trusts.

A management transition plan. For your management transition plan, prepare detailed organizational charts and a timeline that will aid the next generation in the transition to new ownership. Outline manager responsibilities and job descriptions for supporting employees. If there’s a possibility of selling your business, create a document estimating the value of your company as well as a buy/sell agreement. These will come in handy in the event that you decide to sell.

Expert assistance. Engage a team of advisers that can help to ensure a smooth transition. This should be a diverse group that can provide specialized counsel, including attorneys, financial consultants and an estate lawyer.

Many business owners opt to designate their personal financial adviser as a point person to coordinate the team’s efforts while clarifying the overlap between business finances and family wealth.

Succession planning can bring a sense of peace. With simple monitoring and foresight, you’ll no longer have to worry about the company in your absence.

How soon should you begin planning? While it is beneficial always to be prepared for the unexpected, succession planning ideally occurs three to five years before an anticipated transition. Once those plans are complete, the documents should be updated regularly to reflect any major developments.

If you take these simple steps, you can overcome the typical obstacles faced by family wineries and other mid-sized businesses. Raise a glass knowing you have secured your financial future.

• Jasleen Patel is the local business banking market executive for Bank of America Merrill Lynch.