If you’re like most business owners, you probably have a million things on your mind on any given day. You may fill many roles, from CEO to sales to marketing to accounting and more. As a business owner, your task list is full every day, and there are likely many days where you never cross everything off.
Given how busy you are, it’s possible that you haven’t given much thought to one of the biggest challenges that business owners often face. It’s business succession, or the process by which you pass on the business to the next owner.
Many business owners don’t think about succession because they don’t think it’s relevant at that moment in time. The business owner may be relatively young, or may feel that he or she will work in the business for the rest of their life. Since they don’t have plans to leave the business, there’s no reason to worry about succession.
That line of thinking may not be correct though. As a business owner, you don’t always get to choose when you leave the business. In an ideal world, you would pick the when and how succession occurs. Rarely do business owners have that much control over the process.
With a business succession plan, however, you can take greater control over your business’s future and plan for events that may force succession earlier than you anticipated. You may want to develop a plan for each of these scenarios.
Many business owners think of business succession as a retirement challenge. However, it’s also possible that you will exit your retirement not through retirement, but rather because of death.
An owner’s death can be a crippling blow for a business. Think of all the hats you wear. How would your business fill that void? Also, consider those who depend on you, both in the business and at home. Your death could leave your employees, customers, partners, and your family members in challenging positions.
Don’t think disability is a real threat? Think again. According to the Council for Disability Awareness, one in four American adults will become disabled before they retire. The same group found that the average worker thinks they have only a 2 percent chance of becoming disabled. In reality, they have a 25 percent chance.1
In many ways, disability can pose an even greater risk than death. If you become disabled, you may be forced to leave your business, creating significant challenges for the company and for your business. However, you will still likely need some income to support yourself and you may face substantial medical costs.
Personal or Financial Challenges
Life can change quickly. Today, it may seem like you’ll own the business forever. However, it’s possible that events could arise in the future that make you decide to sell the company. You may face debts related to health care or legal complexities. Or perhaps you may simply lose your passion for business ownership. Maybe the market will change, making it difficult for you stay competitive.
Whatever changes arise, it’s always helpful to have a succession plan in place. You can use it to guide your decision-making and navigate a challenging set of circumstances.
Finally, it’s certainly possible that you could keep the business all the way to retirement age and then exit at that time. If so, your business may represent a substantial portion of your net worth. You may be counting on a sale of the business to fund your retirement.
By developing a succession plan early, you can give yourself more time to explore a wide range of options. Maybe you’d be best-served by selling to a competitor, or perhaps you’d like to stay in the business in some capacity and transfer ownership to family or employees. A succession plan helps you explore these options and make informed business decisions.
Ready to craft your succession plan? Let’s talk about it. Tommy Mai Financial can help you identify risks and develop a plan. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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