There are many unforeseen circumstances that could leave your business in a dire situation. Death or disability are rarely anticipated, but if you as the business owner are no longer capable of running your business, you need to know who would take over and how they would handle the transition. Even something like divorce can have a monumental impact on your business. An emergency succession plan can help protect the things you care about most.
Too often, business owners make assumptions about how the business would be handled in their absence. However, the reality is often quite different. If you don't have a legally binding succession plan on paper, you can't possibly predict what will really happen to your company if something happens to you. You've invested a great deal of time, effort, and money into growing your business. An emergency succession plan is important because this is the only way you can ensure that matters are handled the way you would like if you can no longer manage them yourself.
An emergency succession will impact many different individuals. You should carefully consider the effect on each critical group so you can properly prepare your business. Ideally, your succession plan will consider all three of these groups and care for them mindfully.
If you are essentially the face of your business, it's going to suffer a big hit when you're no longer providing the name and personality behind the company. Customers and clients will find themselves fretting over who will handle their accounts, what will happen to unfinished projects, and whether their prior agreements or arrangements will still be honored.
This is why it's important to make sure that you never settle on a handshake agreement in business dealings. Always record your conversations and obligations clearly and legally to protect yourself and your clients. If you're no longer with your company, your clients aren't the only ones who could suffer from broken obligations. Your business may also suffer in the succession from clients who attempt to withhold payment or abandon their end of the agreement, particularly if that agreement wasn't recorded properly.
Your clients want stability. Depending on the nature of your business, you may play a critical role in their health, finances, and future. Make sure that the company is equipped to maintain client relationships, service plans, projects, and other responsibilities.
Employees may worry about the viability of their jobs in your absence. If you're gone, they'll likely wonder whether they still have a job to come to in the morning. They may worry about receiving their next paycheck, getting the promotion they were promised, or having any kind of stability in the future. For your business to succeed in your absence, it's crucial that it retain its employees.
A solid succession plan will keep your employees in place and prevent them from moving on to greener pastures. This puts your successor in the best position possible for lasting success even when you're no longer in place to head the company.
Your business likely played a major role in supporting your family's livelihood. If you haven't put the proper protections in place, they may no longer have ownership of the company or income from your enterprises. If your spouse inherits your company, they may find themselves at a loss as to what to do with it. When there's no succession plan in place, these businesses are often sold for scraps.
A spouse who inherits a company but doesn't have full knowledge of how to run it in the owner's absence will not typically be successful either at maintaining the business or at selling it profitably. You need to have a life insurance policy in place for your family and an emergency succession plan in place for your business to make sure that your loved ones are well provided for and not left with a confusing mess.
In many cases, business owners have more assumptions about their succession than actual plans. Consider what would happen if you left tomorrow for a month-long vacation with no notice and no communication. What problems would your company run into? These are the issues that must be handled with your succession planning.
You need to make sure that your plan has been recorded on paper and reviewed by multiple parties. A lawyer is a crucial piece of this puzzle, but you should also have another third party look over your plan to poke holes in it and ultimately help you make sure that it's watertight.
You should make a succession plan as soon as your business has steady income coming in. While a startup may be too fragile for a complete succession plan, any business that can provide a meaningful income for your family and for its employees should have a plan in place to survive the loss of the business owner.
Sit down with a holistic planner who can help you assess the big picture. This type of professional firm can help you work through the in-depth conversations necessary to complete a well-rounded emergency succession plan. You can then take your plan to an attorney to prepare formal documents that are legally binding in the event of disability, divorce, or death. Include all of your partners and team members in the conversation about succession, including your CPA, financial planner, and family.
Revisit your emergency succession plan regularly and have a professional firm look over it for you periodically to identify issues that may have come up. At a minimum, you should review your emergency succession plan every five years.
Having an emergency succession plan is crucial for any thriving business. Our team at Atlas Financial Strategies can help you with solid succession planning that will give you peace of mind in any situation.
125 W. Romana Street, Suite 720
Pensacola, FL 32502
Phone: (850) 542-4803