Business Succession Planning

Everyone has goals and dreams. How do you know if you’re  business will stay on track to achieve them?

Every business needs to consider what might happen to the business if one of the owners (or guarantors) should die, become disabled or suffer a traumatic illness

 Often there are key individuals within a business who either manage the business, produce significant portions of the business income, or provide or secure the money to fund the business.

A succession plan may avoid the financial hardships for the surviving partners and the deceased’s family.

·        Debt reduction or guarantor protection

What reliance is the bank (or other creditors) placing on any particular partner to meet the financial obligations of the business towards that creditor?

What plans are in place to repay the loans of the business, particularly if one partner dies?

·        Succession planning

If you suffer a heart attack, a stroke, an accident or die have you planned to:

• Retain your business for your family; or
• Sell and relinquish your interest to your partners, key employees or a third party?

If you ignore the opportunity to plan your own succession, what will be the result of your failure to plan?

You are leaving your business susceptible to self-destruct - This is known as “business euthanasia”.

You had the ability, vision, and guts to build your business from nothing.

Do you have the courage to face the challenges of the future? If not, your lawyer and accountant will do it for you (on the way back from your funeral, four cars back from the flowers).

 Would you strive to make more sales and sign more contracts if you knew that within 24 hours of your partner’s death your business will share your partner’s coffin?

A Business Succession Plan is a financial and tax plan that can:

•  Give your business every chance of survival when you are gone or suffer a long term illness or accident
• Ensure your family and yourself receive the true value of your interest in the business
• Allow for an orderly transition of ownership to the remaining partners, family members, or key employees - rather than suffer a fire sale
• Provide a ready market for your business interests
• Retain key employees

 ·        Buy Sell Agreement

Would the remaining partners be prepared to work with the family members of the deceased partner?

Can the deceased partners family members continue to add value to the management of the business?

Will there be a conflict between the income needs of the deceased partners family members and the re-investment for growth needs of the surviving partners?

What amount and over what time period will the remaining partners buy out the family of the deceased?

Where will the funds come from and will this impact adversely on the cash flow of the business?

What of the cash flow / income for the deceased’s family?

 ·        Key person protection

Would the business remain viable on the death of a particular partner?

As a sole business owner would you like to have a buyer who will pay your family for all your years of hard work?

·        Business expenses cover

Protects your business if you become totally disabled and are unable to work due to sickness or injury by covering the fixed monthly expenses of the business.