May, 2016
By Gary Pittsford, CFP®
President and CEO, Castle Wealth Advisors, LLC

Many co-op business owners are getting close to that special retirement date. Being part of the larger co-op organization has helped you to build a successful business and increase your net worth over the last 30 years.

There are important aspects in picking the best succession plan for your company especially if the buyers are going to be children, in-laws, or key employees. All business owners want to maintain the net worth that they have accumulated over the years but they also want the succession plan to work. Being a member of your co-op organization is beneficial when it is time to transition the business. Co-op organizations normally do not provide legal or tax advice but they can be very beneficial to the seller and the buyer with in-store employee training, special conferences, computer software, demographic research, and dealing with suppliers. All of these services, and others, can be an important part of the succession plan to help protect the company for another generation.

Over the past 35 years we have learned that about 30% to 40% of the current owners will sell to one or more family members. About 15% to 20% will sell to key employees, another 10% to 15% will sell to another store owner in their industry, and the remaining stores will just go dark.

If you are selling the business to a family member or key employee you have a lot of options pertaining to future retirement, income, reducing income taxes on the sale, protecting your net worth, and protecting the company and all of your employees.

Before you start any type of transition for the company, make sure that the new buyers that you have agreed to sell to have all of the training and education in order to handle their new position. Make sure that they have gone to many of the co-op conventions and training programs. Make sure that the young person taking over knows all of the right people at the co-op association that you belong to. By starting this succession/exit plan you are signaling the fact that the buyers are now becoming the “quarterback” of your team and that you are now in the process of becoming the “coach” and you will start spending more time standing on the sidelines.

Have you decided yet who will have 51% of the stock and who will have 49%? Developing a transition plan for the stock ownership of your business will be one of your most important tasks.

Another important task obviously is protecting your retirement income in the future. There are at least nine different ways that you can receive income in the future as part of the company succession/exit plan. This is where you need to seriously consider ideas like receiving board of directors fees, deferred compensation, consulting contracts, long term real estate rent, and other options.

Many owners are not quite sure which key employee or which child should take over. Because of that uncertainty we sometimes recommend that the current owner let the potential buyer take more control over the next 12 to 24 months. Let them make some of the big decisions and let them work with the employees, the vendors, and attend the national co-op conventions. Let’s see how the children do over the next one or two years and then you can make a final decision about who should have 51% and voting control.

Gary Pittsford, CFP®, is President and CEO of Castle Wealth Advisors, LLC. Castle specializes in helping families and closely held business owners with valuations, succession planning, estate and income tax analysis and retirement income security. Castle’s senior partners work with clients throughout the country in making logical decisions that help them fulfill their personal and business financial goals. For more information visit, call 1-888-849-9559 or e-mail Gary directly at .