What happens the day after you’re gone or incapacitated? Do you have a succession plan in place for your business?
While I suspect that most business owners have taken care of the family side of things – i.e., they have a will and/or a trust, etc. Has the business been taken care of?
We’ve talked in the past about how few businesses survive a fire, mostly because they haven’t taken care of the contingency planning necessary to continue operations when the business’ physical facilities have been destroyed.
A succession plan is different from a contingency plan. It provides a plan so that the business survives the death or incapacitation of the hands-on owner-manager, or even hands off owner in a family-owned business.
What happens tomorrow?
Going back to the contingency plan for physical business damage, look back at the bombing of the Oklahoma City Federal Building. Despite the destruction of their facility and the loss of all but one employee on site that day, the credit union was open for business the very next day by virtue of off-site employees and redundant systems.
This required the foresight to discuss and put together a plan, which included off-site backups, training for all involved and an execution plan.
Whether or not you are ready for a physical disaster at your business, the likelihood of tragedy striking the owner is just as important – perhaps more important.
An important question starts the conversation: Do you care if the business outlives you if the worst happens? If you don’t, this seems like something your family, clients and employees should know – though I’m not sure you’d tell them if you feel that way.
If you want the business to outlive you, you have to confront that situation and discuss it with your team and your family. Who takes charge? If you don’t lay this out in advance and have agreement with your family, your death could set in motion a struggle that could destroy the company despite your wishes.
Who takes on your day to day responsibilities? It’s likely that more than one person will have to do so, depending on your role. It needs to be discussed with your executive team and documented for your family, whether they will be hands on or not. Think of it as a living will for your business.
How will things work in the first day, week, month, quarter?
Is there a documented, step-by-step checklist to get critical, keep-things-running work done? Who knows what to do? How do they know? How does everyone know that they (one person or several) have the authority to act?
“Oh, they just know” isn’t the answer you want. If you don’t believe me, call your senior people into your office and tell them you are leaving for a 90 day sabbatical in the morning and you will be unavailable by phone or email. Ask them who will run things while you’re gone. Who will be responsible for x, y and z? What duties are they unaware of or untrained for?
Are you comfortable with their answers? Are they?
- Make payroll?
- File payroll taxes?
- Deal with property taxes and the state?
- Pay bills?
- Get the mail?
- Write a check?
- Deposit receipts?
- Access online payments and transfer them to a bank account?
- Access your bank accounts and line(s) of credit, if any?
Who pays the power bill that’s due three days after your death or permanent incapacitation? If you’re the only one who can sign a check, how does that work when your picture is in the paper the next day and your vendors (and your bank) keep seeing checks with your name signed on them? Sure, much of this is electronic, but there will be scrutiny on the accounts. What happens if the bank freezes your accounts?
Who takes care of things like that in the short term if you are temporarily incapacitated? Even if unhurt, but simply lost in the woods on a hunting trip for a week, the inability to sign a check or access your business accounts could create a problem.
Smaller things have derailed companies, or killed them, given the wrong timing.
But I don’t trust anyone with that stuff!
If so, you have work to do. Your attorney, accountant and banker can help, but if you still don’t trust anyone, that’s a fundamental problem to tackle. A business with no trusted senior employees is in a really bad spot. I understand that “trusted” doesn’t necessarily mean “trusted with the checkbook”, but you still need a solution if you care about the post-you business.