What is Your Succession Plan?

These we know to be incontrovertibly true: Your business (with related real estate) is the primary source of your family’s income; it will also be the primary source of your retirement; and you have invested mega amounts of physical and emotional capital toward its success.  In other words, your entire financial future, that of your family, and your employees is dependent upon the continuity of your business. That is true whether you are 70, 50, or 30 years old.  With so much at stake, it is imperative that it survive beyond you and your ownership.

Since no one disputes those statements, why do less than 10% of small business owners have a succession plan or even a business continuity plan?  While no one may have a definitive answer to the procrastination conundrum, please consider these succession insights for yourself:

1. Roughly 75% of owners believe that they can sell their company when they choose to retire.  (But who wants to buy it, who is capable of running it, how would it get financed, and how long would it take to find someone?).
2. Many owners (~60%) assume that one or more of their children will fund their retirement by taking over the family business.  (This actually only happens about 10% of the time).
3. Approximately 90% of small businesses liquidate assets and close their doors when the current owner leaves, either by retiring or incapacity.
4. A Business Continuity Plan is a super easy first step to improve business survival odds in the event of owner tragedy.  This can be funded with inexpensive term life insurance, e.g. Male, 45, Non-smoker, 20 year term, $1,000,000 death benefit, $130.00 month.
5. The same terms as above for a 54 year old is a premium of $270 month.
6. Disability insurance can be obtained that pays a lump-sum benefit to the business or monthly income payments to an individual.
7. There is no age requirement or trigger to begin a written succession plan.  It is a process, not an event, and should be considered at the same time a company opens for business.
8. Talented key employees represent the largest pool of potential successors.  When begun early, grooming them for operational excellence and solving for the funding hurdles can be easily managed.

Planning for business succession, like providing for the financial security of your family, beginning a college fund for children or saving for retirement is best begun immediately.  Please do not defer any of these good-sense goals because you think you’re too young.  Youth equals lower insurance costs, more time to execute a plan, and the advantages of saving/investment accounts compound rates of return. When time is on your side, use it!

You can start with a basic Business Continuity Plan.  We can help. https://perpetualbusiness.co/product/succession-continuity-plan