Planning for the Inevitable

Many entrepreneurs prefer not to think about retirement and stepping back from a life's work. But, like it or not, that day awaits us all

By Debra Turpin

You would think we would have known better. But in 1985, when I co-founded River City Studio, a Kansas City-based graphics-design, marketing, and advertising firm, I didn't have a buy/sell contract with my partner. She decided to leave the company in 1991. Although the outcome was amicable, I was faced with a heap of lawyer's fees that could have been avoided.

When my husband, Paul, started a meat-supply company in 1991, he learned from my mistake and arranged a buyout agreement with his partner. (They are still together.) In the same vein, Paul and I, until recently, hadn't gotten around to making a will, despite the fact that we are both in our 50s, have two substantial businesses, a host of ancillary business involvements, three sons, a grandchild -- and definite opinions about how we want our assets passed on.

It was time to ask smart questions about succession planning -- something we had put off because the answers involve quite a bit of soul-searching.


  The trigger for our need to do the asking occurred two years ago, in the fall of 2001, when my husband and I agreed that we would take a month off from our businesses to enjoy friends and family in a house by the sea in Portugal. At that time, questions such as what-if-the-plane-goes-down entered our minds. So we found a financial planner and arranged with our lawyer to set up the basics: a will, separate trusts, a marital bypass trust, and an irrevocable trust. We signed those documents two days before we left for our extended vacation last September.

The exercise was enlightening if only because it made us realize that we had different ideas for what we wanted to do with our "stuff." While we own two homes jointly -- our primary residence and a vacation home in Arkansas -- we keep the rest of our assets separate. Similarly, we haven't and don't expect to support each other financially, preferring to contribute equally to joint expenses. And it's a good thing, too: while Paul wanted to leave his estate to his sons and grandchildren, I wanted the bulk of mine to go to charities, and I also wanted to provide for three single women friends.

Another plus was correcting mistakes that would have cost us dearly. For example, the insurance policy on the commercial building I own was in my name, which meant that my estate would show an additional income of $1 million from the pay-out of that policy. My heirs would have had to sell just to pay estate taxes. Now the policy is in the name of my business.


  The final basic was appointing an administrator for our trusts. Both Paul and I were leery about leaving that job to a banker or professional trust administrator who didn't know our family. Instead, we chose a pragmatic daughter-in-law who has a degree in accounting and a profound respect for carrying out our wishes.

With the basics attended to, we next considered the bigger question of when we would leave our businesses -- a variation of what we want to be when we grow up. This is the issue that we've been wrestling with for the last two years. In part, it prompted our extended time away from our businesses last year.

The upshot has been that in our 50s -- Paul is 54, and I just turned 50 -- we have different views. Paul expects to be running his meat business, River City Meat, until he is 62 (and I would suspect much longer, since he gets bored when he isn't occupied). He and his partner have the staff in place to enable him to take time off when he feels the need.

In my case, with the economy having battered marketing and advertising firms, I am looking to change careers within three to five years. In the past year, annual revenue at River City Studio has fallen, to an expected $2.0 million this year from a high of $3.0 million in 2000. Last year the company was unprofitable, and this year we will barely break even. We've had to cut our staff to 13, down from a high of 23.


  The decision to sell has led to the really tough questions: To whom do I want to entrust the business I spent 17 years building and nurturing? What role, if any, would I like to play in it? So far, I have only tentative answers.

While I would prefer to sell and take my leave immediately, I understand that buyers often want owners to stay on for a transition period until they understand what the owner contributes. I accept the fact that I may have to do that. A corollary question is my need for a sum of money -- about $1 million -- that would ensure that I am financially independent and able to continue supporting my share of our household expenses.

Then there is the life-engaging question of what's next for me. Ideally, I see myself continuing to work, but not full time and not in the capacity of having to be responsible for a staff. Instead, I envision myself working independently, perhaps handling specific accounts at River City Studio if the buyer and I are compatible, otherwise tending to my ancillary businesses. Paul and I, for example, have shares of rental property in Mexico that we have renovated, and I own a Web site that sells study cards for an anatomy course that all health-care professionals must pass. Rounding out my vision for the future would be doing more volunteer work for my church, continuing to travel, and spending time with friends and family.

Thus, the process is in place for a smart succession plan for the business and personal assets that Paul and I have built over a lifetime. That it should have been started earlier isn't the point. The point is that we've finally done it -- and it's something all entrepreneurs should do.

We've asked and answered the basic questions involved in the process, and we're now engaged in tackling the bigger and tougher ones. The exercise hasn't been easy. However, it is essential for assuring the future that Paul and I want -- the one that will come into focus only if we do so.

Debra Turpin owns and operates River City Studio, a Kansas City-based graphic-design and marketing firm she co-founded in 1985.

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