All relationships come to an end. Personal relationships through death or divorce. Business relationships through death or retirement. So ending a business relationship may be planned (retirement) or unplanned (death or serious disability).
If you are a small business owner, are you ready for these?
If you were to be struck down by the proverbial truck tomorrow how would your family cope? Would your spouse be willing to become involved in the business? How would your business partners feel if your spouse was suddenly to try and take control of your share of the business? Would your business partners want to buy your spouse out? Would they be in a position to do so? Is there appropriate insurance in place to cover your loss?
What if you were struck with a debilitating illness – have you planned to allow the business to continue to operate while you are recuperating? How would your business partners cope with your absence?
While a business may not be considered to be a natural person it will at some point in its life cycle die, or your relationship with it will, come to an end. If you have a business you should have a plan to cover all contingencies, not just when things are good but also when things are bad. A Business Succession Plan is just part of doing business.
It is essential to ensure the fallout of an unexpected event is appropriately dealt with. It is better to make sure there are enough lifeboats on board rather than wait to hit the iceberg and find you didn’t have enough. This applies regardless of whether you are a sole trader, a partnership or a company although the type of plan you need will be different.
A Business Succession Plan is a document, or perhaps collection of documents, such as a Shareholder Agreement or Buy/Sell agreement drafted with the assistance of your legal and financial advisors that address all the myriad of events which can happen that effect a business such as:
• When a key person dies or loses capacity;
• When a business partner wants to leave the business;
• When a business partner wants to retire;
• When a business partner is suffering a marriage breakdown; or
• How the next generation are to be brought into the business.
It is critical to have the appropriate plan in place to ensure that you, your business partners and/or your family are not left with a mess which will cost far more to sort out than the extra dollars and time spent in planning.
Taking the time to make a Business Succession Plan should be part of any business no matter what your circumstances. Talk to your legal and financial advisors to ensure that you, your family and your business are all protected.