I recently wrote a blog article about building companies that last and the focus was really about transferring wealth from the owner to their family in the event of a death. Essentially, estate planning. This is great stuff to think about and I encourage everyone to consider this, to make sure that there is a plan in place to transfer your ownership of your company from yourself to others, but I think the view of the author was overly simplistic.
We need to do more than just plan to transfer ownership. We need to have businesses that continue if the owner dies, gets ill, or gets disabled. Transferring the ownership from one person to another is not necessarily going to allow the business to continue. The business is going to have a disruption. As a new management team comes in place, somebody else takes the reigns, your star sales people may leave. Many business owners I spoke to said that in the event that they left the business, and there was a vacuum waiting for a new management team to be installed, they feared that many of their key employees would leave. What would yours do?
In reality, what we need to have is plans for complete continuity. We need multiple people involved in management so that if anybody gets injured or ill, the business will continue. Those employees will know that the next paychecks coming, so those employees are not encouraged to suddenly float their resumes and move to your competitors to protect themselves. You may have very loyal employees, but they may get very scared in a situation like that. It may be time for them to start looking to protect themselves, which may not be in your best interest.
We need to build something more robust. What does it look like? It looks like multiple people involved in management. It looks like people in the know that are taking care of the business that can take over the operations in the event the owner is not there. It looks like a team approach to business and it looks like no one person is absolutely necessary for the business to continue. The value is divided and a management control and direction of the business is run by multiple people. These are keys.
We need to do more than just plan for what if an owner dies. We need to plan, realistically, more than where does the ownership go if somebody dies, we need to plan realistically what happens to the business and how it’s managed and how it’s controlled in the event the owner isn’t there. The business needs to continue. The employees need to know that the business is going to continue in order to protect the value, otherwise, you may be transferring ownership of a company that’s getting severely damaged in its value.
What are your thoughts? Have you had experience with this? What have you set up to make your company continue in the event of death, disability, or other disruption of the owner’s life? Let us know in the comments below.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages.com/photographer Josephine Eber.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.