Succession is More than a TV Show; It's a Wake-Up Call for Entrepreneurs
Five Ways to Prepare Your Business for the Unexpected
As entrepreneurs, even if we get a few minutes to indulge in a hobby, our businesses are always in the back of our minds. That's why the only thing we were thinking about while watching the Succession finale along with the rest of the country was what would happen to our business if we were no longer able to manage it.
Part of owning a business is planning for its future. Who would run your business if you were no longer able to do it? Who do you trust to make those all-important decisions that would keep your business going? Or, what provisions would you put in place to ensure a smooth sale of your business? Succession planning is an important part of owning and running a business; here are five things you can do today to preserve your personal and business legacy.
Draft a will. According to a senior living referral service Caring.com survey, approximately 67% of Americans do not have an estate plan. You can create a will online in minutes without hiring a lawyer. RocketLawyer has Living Will and Last Will and Testaments templates for different states available. We recommend meeting with an experienced attorney to advise you on the best approach for your business.
Write a Buy and Sell Agreement. A buy and sell agreement is a legally binding contract that stipulates how a partner's share of a business may be reassigned if that partner dies or otherwise leaves the business. Even if your business is a sole proprietorship, a Buy and Sell Agreement is imperative to guide how your business will be handled if you are no longer there.
Research "key person insurance." A specific type of life insurance policy provides a death benefit to a business if its owner or another significant employee passes away. Startup budgets are tight, but it might be worth exploring "key person" insurance when you bring on employees and investors.
Regularly update a contact info spreadsheet. Remember the index card your parents or guardians left on the fridge with all the emergency contact numbers. Think of this as the business version. Ensure to include investors, board members, pr firms, vendors, distributors, accountants, lawyers, and anyone else who should be contacted in case something happens.
Create succession plans. According to the Society for Human Resource Management, many organizations only think about succession planning once someone retires or dies. "Then the company is operating in a crisis, which leads to poor decisions," says Mary Kelly, chief executive officer of Productive Leaders, based in Dallas, and co-author of Who Comes Next? Leadership Succession Planning Made Easy. Develop a contingency plan now to avoid potential problems in the future. Some things to consider: Who would be the primary decision maker for the business in the short term and long term? Who will make financial decisions and sign legal documents in your absence? How would the company be re-structured if you weren’t running the day-to-day operations?
Business owners are wired to think about growth, five-year plans and revenue. But, life is unpredictable. Succession and estate planning might be at the bottom of a founder’s to-do list, but can help to ease a transition and ensure that your vision for your company is secure even if you’re not there to manage it.
This article contains links to third-party websites. Although such links are for the convenience of the reader, user, or browser, the Enthuse Foundation does not recommend or endorse the content of third-party sites. Contact a financial professional or lawyer for more tailored information.