Recently I had a Telecom client pass away, too soon in my
opinion as he was still in his prime. This is the second such incident in a
year that I have experienced and to be frank it is quite unsettling. I guess
that this is one of those inevitable things that happen with age. As I get
older I find myself hearing about those close to me come down with illness or
pass away more frequently. Despite this recent event’s impact on my own life, I
am sure it is having a more profound and exponential effect on the family of
the deceased. To make matters worse, I know that my clients business is now
undergoing some big changes.
When someone close to you dies it is a difficult thing to
come to grips with. Our emotions have a way of high jacking our ability to think
clearly and react as we should under normal conditions. I am sure that each of
us has a memory of this exact thing happening to them and simply being numbed
by the news, for me that was my Grandmother. And in actual fact it took me
several years later to fully deal with her death. I can only image that on top
of dealing with my grief, having to also deal with the running or survival of a
small business.
The disposition of a small business is a difficult task
on its own, and it would be made even harder without a succession plan in
place. Small businesses are usually service orientated and their clients are used
to the quick response and reaction times that come along with that service. Any
change in the level of service could have a huge impact on both the client and
provider.
From the client’s perspective, being a small business
themselves interruptions in service to their own clients has an immediate
impact on the bottom line which may force them to seek out an alternative partner.
On the provider’s side of things, now you have someone trying to pick up the
pieces, service the known clientèle and re-establishing business ties with the
community through a new relationship with the replacement manager/owner.
These complications can lead to the failure of a business
during this critical transition period. The following three steps should
minimize the impact on your clients and ensure the survival of your business
and legacy.
1.
Have
a succession plan in place:
If you want your company to
survive and thrive after you have gone then a succession plan is a critical
component to retaining clients during the transition period as well as maintaining
service levels.
2.
Have
a provision for the business in your will:
Letting your family know
your wishes is very important so that there are no legal issues or delays as a
result of the transfer of ownership. This process will ensure the value of the
business remains intact. It would also be helpful to communicate with both your
clients and immediate family your succession plan so that all parties will have
clear expectations if the unthinkable happens.
3.
Have
a Buy/Sell agreement in place:
Life insurance is a great
way to ensure that money is available for the purchasing of a business should
one of the partners pass away. The idea is that each partner would pay for the
others life insurance and receive a benefit equal to the value of the business
which can be then exchange for full ownership of the business. The advantage is
that the benefit is almost immediate and does not go through probate and can be
given to the surviving family quicker.
Small businesses can be complex and as such need
structure to run smoothly and efficiently, the moment it doesn’t there is a
concern for its service level and by extension survival. Implementing a plan of
succession with the help of a transition team including, a tax consultant,
lawyer and insurance professional will ensure that both your family and business
are taken care of.
For more information about business
solutions visit http://www.protectingwhatmattersmost.com/#!business-solutions/c11l7
Written by Edgar Schuchardt
– Life Insurance Advocate & Agent
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