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Contractor Succession Planning: Are You Prepared?

As we look to emerge from the COVID-related labor and supply shortages that disturbed the construction industry, as baby-boomers continue to age, and as Congress considers ways to raise revenue, many contractors are looking to plan the future for their companies, employees, and themselves.

Here are a few pressure points pushing this process along:

  1. Many construction firms are currently owned and managed by a group currently looking at the Golden Years approaching quickly. What will they do and when?
  2. Succession for the company includes a transition of both the ownership and, maybe more importantly, a transition of “management.” Who will be the future leaders? What talents and capabilities do they have today? What training will they need to be effective in the years to come?
  3. Owners who are stepping away, what does this mean to them? How do they manage their duties, position, decades of dedication to the company, etc.? What does “retirement” mean to them? How will they manage their personal finances once the paycheck stops?
  4. Congress needs to raise revenue. They included significant income and estate tax changes in the current tax proposals, then took them out. Will they add them back in or re-introduce them next year? Highly possible. Either way, the high federal estate/gift exclusion cuts in half in 2026 without the need for any legislative action. Then there’s state estate tax to consider. There’s no NY gift tax and any gifts made at least 3 years before death completely remove that asset from NY estate tax exposure. The timing is perfect to make or finalize plans before law changes restrict your options or increase the tax cost of doing so.
  5. COVID just won’t end. Are we just tired? It has been almost two years of stop, pivot, and move on repeat, all while managing the work, the workforce, technology, supply chain issues, etc. All these pressures and varied risks can wear out the management team. Is it time now to get a plan in place?

The exit planning process we follow is a customized, holistic, and multidisciplinary approach to designing and implementing the business owner’s successful exit from their business. The exit planning process helps an owner assess his/her options based on the time frame available. Additionally, it helps to assess the tax situation and financial position of the business and the individuals involved, with the objective of fulfilling the owner’s personal goals. The process helps maximize the financial return, minimize tax liability, plan for contingencies, and increase the likelihood of a successful transfer of the business ownership and its management.

For a construction company business owner, the process requires input from a team of exit planning experts who have a deep understanding of the nuances of the construction industry.

Your plan should be designed for YOU! We have a team that has assisted business owners and their families in several hundred transitions, and as far as we can tell, no two plans have been exactly the same.

    Seven Steps for Business Transition:

    1. Determine Owner Objectives

    What does the owner want to happen?

    2. Assess Current Business and Personal Financial Resources and Needs

    What does the owner need from the arrangement financially and what is feasible for the business’s tax and financial situation? Also, how much the business is possibly worth provides direction on what options might even be available.

    3. Maximize and Protect Business Value

    What needs to be done to maximize and protect the value of the business?

    4. Consider Sale to a Third Party vs. Transfers to Insiders

    Is a gift, sale, or part gift/part sale to an insider desired or even feasible? Are insiders even interested? What needs to be considered or done when selling to a third party?

    5. Develop the Business Continuity Plan

    A contingency plan is needed in case the owner dies or becomes disabled prior to the planned exit. Are buy/sell agreements properly structured and funded when multiple owners are involved?

    6. Incorporate Personal Wealth and Estate Planning Elements

    The owner’s overall financial plan needs to be reviewed and addressed under the changing circumstances – How should things be structured, where will they draw from and how much? Has their tax situation changed? Is their estate plan properly aligned?

    7. Implement the Plan and Follow-up Regularly

    Actually implement the plan and continue to monitor as things evolve.


    Some may try to do it themselves because they want to save on professional fees or think it’s easier to do than it really is. Unfortunately, they don’t realize the complexities involved in doing it properly. They don’t know what they don’t know. There are many business and personal issues to consider that require expertise from many different disciplines. Succession planning specialists have the expertise to anticipate and identify potential problems that otherwise may go unrecognized.

    A multidisciplinary approach is a very powerful methodology for business owners to achieve and implement an integrated, comprehensive, and widely accepted exit plan. The multidisciplinary approach allows the business owner to draw on the experiences and expertise of several advisors who will work together as a team to assist the business owners and the interested parties in defining and meeting their strategic goals.

    Our skilled team takes the business owners by the hand to:

    • Create and promote value within their business through value drivers and using tools they already have
    • Preserve that value from the grasp of the IRS
    • Transfer ownership and value as profitably as possible no matter who they sell to or devise gifting strategies where feasible and desired.
    • Integrate personal, financial, and estate planning goals with the goals of their business to maximize profit and cash flow while minimizing tax liability

    Every contractor will eventually leave their company, voluntarily or otherwise. Don’t delay. This is more time-sensitive than you think if you want to have the best chance of controlling the outcome.

    If you need further guidance or have any questions on this topic, we’re here to help. Please do not hesitate to reach out to our trusted experts to discuss your specific situation.

    This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.