Many people do not plan for the future and they believe that if they are healthy, they do not have to plan for succession. They do not plan to sell the business or if there is someone who can take over the business and run it in event of a premature death. Untimely deaths happen and if you own your business, what have you done to make sure that the business will survive?
If you are sick and have time to plan for survival of your business, that is one thing, but what happens if you do not have any warning? Over the weekend, we found out that a friend passed away unexpectedly. No warning, no time to plan. If she owned a business, what would have happened?
Things to think about:
- signing authority – if you are the only signing authority, who will sign your payroll if you have staff?
- do you have a will? is there someone who can take over and make decisions etc to run the company, at least temporarily until decisions are made?
- if you want a family member to take over the firm, do they want to? I know of one where the spouse took over the business but has no interest in the business, as a result, the business has been coping but profitability has dropped, decisions are not being made on a timely basis which is impacting the bottom line. A new division of the company was the dream of the old owner but since his passing away, the viability of this division does not exist. Instead of making a business decision to discontinue this division, the owner’s spouse is keeping it because that is what the former owner wanted to build it. Unfortuanately the losses in this division are affect the operations of the profitable divisions. Another person may have closed the division to maintain cash flow.
- passwords, if you have everything in your office including your accounting protected, do you have a list of passwords written down so that someone can access your files?
- if you believe that no one can operate the business, do you have a plan which you wrote down to help the heir to sell the business. If the spouse was not active in the business, they may no nothing of the business. It is difficult to sell a business if you do not know anything about it, the customers, the competition etc. Sometimes, business owners place in a file or provide information to their accountant information which will be used in emergency on their demise to help someone make an orderly succession of the business.
Planning is key, you cannot assume that you will be here forever and you will always have time to plan the sale of the business if you get sick. You could be hit by a bus, you could have an untimely death which does not allow you to plan. Make sure that you have an emergency plan if you are a business owner, no matter how old you are.