04 March, 2015
Business Succession Planning: Some Question to Ponder about Leaving a Legacy
Business succession planning is the process where a business owner plans for the business to continue as a viable entity in the event of an adverse occurrence. This can include any number of events from the major shareholder requiring an exit, to a director passing away. It is a form of liability protection.
The following are some points for any business owner, or prospective entrepreneur to ponder.
1. If you knew that your time is up, and you will die, what would you advise your family to do with your business? Can they take over and provide for themselves?
2. How would your business associates respond and behave?
3. If, due to death or disability, you are unable to continue, what is the likelihood that your creditors will demand immediate payment from you or your family, or they would take legal action and seize your assets?
4. What is the likelihood that your debtors will decline to pay?
5. If you have any business or personal loans, what is the likelihood that the bank will recall the loan, refinance it, or take legal action to recover it?
6. Your estate requires money upon your death. How can they extract it without damaging the cash flow of your business?
7. Even if there is sufficient funds, the executor requires a court order to proceed to disburse your estate. Can your family wait all those months?
8. Considering the effort taken to build your business, how would you feel if your inability to continue due to death or illness leads to a fire sale? Can you accept if your share of the business were sold for 30% of its value, for example?
9. The day the owner dies, the business becomes speculative in value. Do you want that to happen to you?
10. Have you tried asking your family members to run your business while you are on vacation or overseas? Are they able to step into your shoes?
11. Considering that you might be strapped for cash, can you imagine without coverage and liability protection what the bank, the court or your creditors will say?
12. If you are a minority shareholder, will your position be protected after you are gone?