Many people under define / underestimate their status as a small business owner. We often hear statements like this at the office:
- I only own 2 rent houses.
- I only do bookkeeping as a side gig.
- I only have 1099 / contract employees.
- I only lease these 50 acres to a local farmer.
- I only am helping my brother launch his business– am only a 25% owner.
- I only….
- I only….
- I only….
All of the above statements and many others just like them equal business ownership and need to be planned for in a very specific manner
If you are a small business owner, you probably spend a lot of your time in the day-to-day work of your business and when you take time to work on your business, you are spending time figuring out how to stay open and stay profitable. One of the last things on your mind (if it is on your mind at all) is what will happen if I am disabled or when I die?
The problem is that you are likely to be disabled at some point, even if only temporarily, and you will die one day. Both of these events pose major risks for your business, your employees, and your loved ones if you have not thought about AND planned for what happens in the event of your disability and death.
Risks of not having a business succession plan:
- Business momentum will be lost, including up to, total cessation of the entire business.
- Business value will drop QUICKLY and possibly entirely during a period of reduced or no operation.
- Employees may not be able to be paid.
- Business payments/deposits may not be able to be received/deposited.
- Business vendors may not be able to be paid.
- The business will not be able to be sold (if applicable).
- Courts will likely need to be involved to determine who has authority to act in the absence of the business owner.
What you should be planning for in a business succession plan:
- Who can run the business in the absence of the owner?
- How can immediate access be given to the person(s) who have been selected as temporary or permanent successors?
- What will happen to the business in disability or death?
- How will employees and other expenses be paid?
- Will the business be sold at your death, and if so how and who receives the proceeds?
- How can lengthy, expensive, and potentially difficult court proceedings be avoided?
This past year, we have helped more clients than I would like try to retain business assets that once belonged to a loved one who passed away. If you are business owner and have not formally created a business succession plan – do not keep putting this on the bottom of your priority list.
“Only put off until tomorrow what you are willing to die having left undone” ― Pablo Picasso