Can Your Business Continue Without You?
You've labored for years to build a business that provides for you, your family and your employees. What happens if you or a key team member dies, retires or moves on? Do you have a plan for the business to thrive without you? A business succession plan puts your mind at ease and gives you the confidence that your business will survive and/or be transferred to others in accordance with your wishes.
Why Does a Business Need Succession Planning?
There is an impact on every business when a critical employee or owner dies or retires. Small business succession planning is less complex but arguably more important than that of larger firms because each person is even more essential to the operation. When a key person leaves or dies, it could mean the end of the business without the appropriate planning.
A succession plan also lays out a strategy to handle tax liability and/or transfer ownership when the business owner dies. Without such a strategy, the family could lose control of the company or be forced to sell the business to pay estate taxes.
Though a larger company has more employees, losing a key person without succession planning leaves the business rudderless during the recruiting process to fill the position. Delays cost time and can potentially damage profits and reputation. Succession planning for critical roles ensures the firm's profitability and mission continuity.
What is Business Succession Planning?
The first part of succession planning is examining your business. What are its competencies and weaknesses? Which positions are critical to its survival and profitability? The second part is creating plans for who will succeed you or other necessary employees. The third part is determining how you will fill any financial gaps.
If you are a business owner, succession planning is a separate but critical part of an overall estate plan that includes your retirement plans and investments. The two plans overlap when a family business is involved. In family business succession planning, a clear plan and leadership training for the person who will step into your shoes go a long way toward continued profitability and harmony.
Here are a few scenarios where succession planning can be a critical strategy to ensure business continuity:
- Death of the owner, a partner, or CEO
- The unexpected loss of a key employee
- As part of your retirement exit strategy
- Family succession
Insuring Your Success
Insurance is an indispensable tool in succession planning. Life insurance for a business owner, CEO or critical employee provides an immediate lump sum of money that can fill a financial gap in the event of their death. For example, it could fund a buy-sell agreement for a partner to purchase a deceased partner's share or it could bolster finances when a key salesperson dies.
Whole life insurance is an option that stays in place for the life of the person insured as long as the premiums are up to date. It provides guaranteed premiums and growth, cash value and a death benefit. Some policies even pay dividends.