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If your cigar business is family-operated, interpersonal dynamics and generational differences could complicate your intention to pass your business down to your children. Careful advance planning and a few tried-and-true strategies can help streamline the process.
Strategy #1: Communicate Your Wishes Early
Yours might be a cigar-loving family with deep loyalties to the business you’ve built and cigar culture as a whole, but each of your offspring is likely harboring a different vision for the future of both. Make sure they know exactly what your intentions are for the company, even if those plans could ruffle a few feathers at first.
Communicating your goals early means you’ll avoid making rushed decisions and gives you time to talk through the details with key individuals. It’ll also give your heirs time to ask questions and adjust their expectations. In the highly regulated tobacco products industry, the dysfunctions caused by chaos and infighting can be debilitating.
Strategy #2: Create a Detailed Succession Plan
Once you decide to pass your cigar business on to one or more of your children, you’ll want to create a business succession plan that outlines how the process will work. This plan should be as detailed and unambiguous as possible to avoid misunderstanding.
For example, let’s say you operate a cigarillo shop and you want to pass it down to your two children. Your business succession plan should explain each child’s role, such as which one will handle store operations and which will focus on marketing and sales.
Strategy #3: Obtain a Business Valuation From a Third Party
Whether you want to pass down your cigar business as a gift to your kids or complete a formal sale to them, the process will run more smoothly if you have an accurate valuation of your business in hand. This is especially true if one child’s heart isn’t in cigars. In this case, allowing them to cash out requires knowing the value of their ownership interest.
To maintain family harmony, avoid even the suggestion of bias or favoritism by using a third party to conduct the appraisal. As a bonus, the professional business valuation appraiser might see factors you miss, such as the changing tobacco regulatory landscape.
Strategy #4: Think About the Unthinkable
You’ve loved and nurtured your cigar business just as you’ve loved and nurtured your child, but you can’t always protect either of them from difficulty and upheaval. The best you can do is lay the groundwork for resilience. This is what a succession plan is for—for both your child and your cigar business.
For instance, how will your business manage to hang on if your child winds up in divorce proceedings with a spouse who wants half? What if, twenty years from now, the regulatory environment for tobacco products threatens to cripple the industry, or heat waves and drought render supplies scarce? A careful succession plan can lay out a business framework designed to weather such storms.
Strategy #5: Talk to an Attorney
As you start your succession planning, discuss your desires and concerns with an attorney who has experience working with businesses in the cigar industry. They can identify all of your options, including those you likely haven’t even thought of, and help you prepare for the eventual transfer of your company.
Contact Venerable Law at 813-680-4530 to schedule a free consultation. We can discuss your goals for passing down the business and help you develop the right succession plan to minimize potential conflict.
