How to secure your business’ future in the event of your death
When you first start a business, your focus is usually just on getting it off the ground and turning a profit. But as you business grows over the years there’s something else you need to consider: how does it end?
Because as important as you may be to the running of your business now, if you want it to expand significantly, or at some point to leave it, then it needs to be able to function without you. And you need an exit plan in mind.
As strange as it may be to think about leaving a business you’ve only just launched, the right time to think about an exit plan is now. Because every decision you make in business has the power to change how it grows, and influence how important YOU are to the running of it. And you need to be making decisions now that will increase the value of your business, and its capability to exist beyond you, later.
And that’s not just if you want to sell it – but if you were to suddenly be unable to run your business through illness or death. What would happen to it then? And to ensure a seamless transition, what should you be thinking about right now?
Get your personal affairs in order
Before you start worrying about your business affairs, it’s important to make sure your personal ones are in order. If you haven’t done so already, create an end-of-life plan or will through a business like the Postage that details your estate plan, legacy, and funeral plans.
In this plan, you can also include critical documents for both your business and personal life. The more information you have in your plan, the easier it will be for your loved ones to wrap up your affairs and adjust to their ‘new normal’ without you.
Create a succession plan
As important as it is to have your private affairs in order in a will, it’s also crucial to have a succession plan for your business. This plan outlines the course of action for your business when you’re no longer at the helm and don’t have time to plan your retirement. Such a plan can include whether:
- The business will be sold in the event of your death
- You’ll give shares to employees or family members
- You’ll name someone to take over the business
If you request for the business to be sold, you may consider an open market sale, or a sale to someone close to the business or already working within it.
When you’re creating a succession plan, make it formal. Discuss all options with business partners and family members, and get legal officials involved to put together the paperwork. For family business succession planning, you need the help of an expert.
Consider a living trust
A living trust can be an important consideration from the moment you start a new business. It allows for a seamless transition of ownership from one party to another, which is particularly convenient if you already know who you want to take over ownership of your business.
A trust also means you can keep the transition private while avoiding probate costs. You may even benefit from some tax advantages. However, it’s worth keeping in mind that they can cost a significant sum of money to establish.
Discuss your succession plans with those involved
You already understand the importance of communication in your workplace. And communication is just as important when you’re thinking about the future of your business once you’re gone.
If you have someone in mind to take over ownership once you pass, make sure they know about it. More importantly, make sure they want it. Failure to communicate your plans with key players in your business and family members could result in it failing or being sold – two things you may not have anticipated.
There is never any way to know for sure that your business will thrive long after you have passed. However, there are many things you can do to make sure it’s on the path to success, regardless of whether you’re there or not. Don’t underestimate the value of having personal and professional plans in place for the best chance of success.
Photo by Keren Levand