Who will run your business when you are no longer able to?
As the old adage states, “Fail to plan and you will plan to fail”. Whilst this may seem a little worn out it is still very relevant and true, particularly when it comes to business. For most business owners their business is a result of many years of hard work and dedication. But what happens if you are suddenly unable to turn up to work anymore, or it has come time for retirement? What will happen to your business then? It is not necessarily a pleasant thing to think about, much like people shy away from making or updating a Will, but the last thing you want is for those years of hard work to all come to a grinding halt because you did not consider and implement a business succession plan.
Business succession planning refers to assessing, devising and implementing “exit strategies” for the business owner or owners. This can be for when there is an unexpected need for a new owner – such as in the case of death, disability or significant trauma – or it can also be utilised in relation to planning for the future, such as the business owner/s going into retirement, passing the business on to family member or selling it to a completely unrelated party.
When implemented correctly, business succession plan can assist you to:
1. Address the issues of when and how the changes to new ownership and management will occur, and
2. Manage your business to have an improved chance of survival when the transition to new ownership or management takes place.
It is important to differentiate between business succession planning and key person insurance as the two concepts are often confused. Business succession planning is generally concerned with the more logistical and day-to-day implications to the business should the owner not be around. This includes considering who will manage the operations and/or be the new owner and how would the succession impact the spouse or beneficiary of the exiting party. Essentially a risk management strategy, business succession planning should also involve any other entities that are operated, managed or owned by you or your business.
Key Person Insurance exists to protect the business against risks that it may be exposed to should the “key person” (or persons) suddenly exit the business. A key person in this context is considered to be a business owner, principal, manager or sales executive. These people are valuable in the business as they generate income and profit and they may generate capital cost for re-training or replacement. Key Person Insurance is concerned with the direct and immediate effects to the financial state of the business such as revenue and profit. It considers, and seeks to formulate answers to questions such as; if the key person is no longer around what would be the effect on revenue and profit? Would the business be able to continue trading? Could it pay the necessary bills and other costs?
It is extremely important to have plans in place that will protect not only your lifestyle interests and needs but also your intentions for your business. It is never too early to start planning for the future, so why not contact the professionals at The Quinn Group to find out more about a tailored business succession plan for your business.
The Quinn Group are able to provide business owners with personalised advice on securing the future of their business. For more information on succession planning for your business, contact us on 1300 QUINN or click here to submit an online enquiry.