You probably have a plan for Monday morning.
Employees show up. Customers call. Work gets done. Revenue comes in. Payroll goes out.
That’s Plan A.
But if you own a business, there’s another question worth asking:
What happens to all of that if you don’t show up Monday morning?
For many business owners, the company is much more than an investment.
It pays the mortgage.
It buys groceries.
It funds retirement.
It supports employees and their families.
It may eventually become the owner’s largest source of retirement income.
In that sense, your business is part of your family’s financial life-support system.
And yet many owners have spent years building the business without creating a clear plan for what happens to it if they die, become disabled, retire or simply decide they’re done.
You might think of that plan as your business will.
Your Personal Will Doesn’t Answer the Business Questions
A traditional estate plan may answer questions like:
- Who receives your assets?
- Who handles your estate?
- Who makes decisions if you become incapacitated?
Those are important.
But a business creates another layer of questions.
Who owns the company after you?
Who actually runs it?
Can your spouse inherit your ownership even if they have no interest in operating the company?
Can your business partner afford to buy your family out?
What happens if one child works in the company and the other children don’t?
What happens to employees if leadership suddenly disappears?
And perhaps the biggest question:
Where does the money come from?
Those questions often aren’t solved simply because someone has a will or trust.
Plan A vs. Plan B
Imagine two versions of the same company.
Plan A
The owner dies unexpectedly.
A written succession and buy-sell strategy already exists.
The business has an agreed-upon method for determining value.
Everyone understands who can buy the ownership interest.
Funding has been considered.
The owner’s family knows what to expect.
Employees know who is in charge.
The business has a chance to continue operating while the family deals with the loss.
Plan B
The owner dies unexpectedly.
The spouse inherits part of a business they never wanted to own.
The surviving partner wants control but doesn’t have enough cash to purchase the shares.
The children disagree about what Dad or Mom “would have wanted.”
Employees begin wondering whether they should find another job.
Customers notice the instability.
Attorneys and accountants are brought in to figure out a problem that could have been discussed years earlier.
The same person died in both scenarios.
The difference is what happened afterward.
Your Business May Be Feeding More Families Than Yours
Business owners sometimes think of succession planning as an estate-planning problem.
It is.
But it can also be a family security problem.
Think about the people depending on the business:
Your spouse.
Your children.
Your employees.
Your employees’ children.
Your business partner.
Maybe vendors and contractors too.
If your company disappeared, how many households would feel it?
That’s why business planning isn’t only about preserving a company.
It can be about preserving income, housing, food, stability and choices for the people attached to it.
What If You Don’t Die?
Death gets most of the attention in succession planning.
Disability may be just as disruptive.
Imagine a contractor who can no longer work in the field.
A surgeon who can no longer operate.
A salesperson who can no longer travel.
An owner who survives a serious accident but cannot perform the work that makes the company valuable.
The business owner is still alive.
Their ownership still exists.
But their ability to produce may be dramatically different.
That raises a different set of questions:
How long would the company continue paying you?
Could the business afford it?
Would the other owners be required to buy you out?
How would the value be determined?
Where would the money come from?
Life insurance is commonly discussed in buy-sell planning. Disability planning can be overlooked even though a long-term disability could create a very similar ownership problem.
What About the Kids?
Family businesses create another difficult problem.
Suppose you have three children.
One has worked beside you for 15 years.
The other two chose completely different careers.
Now imagine dividing the estate “equally.”
Does each child receive one-third of the company?
That sounds equal.
It may not feel fair to the child who helped build it.
Giving the entire company to the involved child may create the opposite problem.
Now the other children may receive significantly less of the estate.
There isn’t one universal answer.
But there is a question worth considering:
What would you want your children to experience after you’re gone—cooperation or negotiation?
Planning gives you the opportunity to answer that question while you are still here.
What Is Your Exit?
There’s another event business owners sometimes avoid thinking about:
Nothing bad happens.
You simply get tired.
After 20, 30 or 40 years of building the company, you want out.
Then what?
Sell to your kids?
Sell to employees?
Sell to a partner?
Sell to a third party?
Keep ownership and transition management?
Each option creates financial, tax, legal and emotional considerations.
And the value of the business may represent a significant portion of your retirement.
You’ve spent decades turning your time, stress and risk into an asset.
Eventually, you need a strategy for turning that asset back into income.
That’s why exit planning shouldn’t necessarily begin when you are ready to leave.
Five Questions Every Business Owner Should Be Able to Answer
You don’t need to know every legal document or insurance strategy.
Start with the outcome.
Ask yourself:
- If I died tonight, who would own my business tomorrow?
- If I couldn’t work anymore, what would happen to my ownership and income?
- If my partner died, could I afford to buy their family out?
- If I wanted to retire in five years, who would realistically buy this company?
- What happens financially to my family if the business stops producing income?
If one of those questions makes you uncomfortable, that’s useful information.
It may simply mean there’s a part of the plan that hasn’t been built yet.
You Built the Business. Now Protect the System Around It.
Most business owners are builders.
You solve problems.
You take risks.
You employ people.
You create something that didn’t exist before.
Business continuity planning is an extension of that same responsibility.
You aren’t planning because you expect something bad to happen tomorrow.
You’re planning because too many people depend on what you’ve built to leave the outcome entirely to chance.
At Salt Lake Financial Planning, we can help business owners identify the financial questions around succession, protection, retirement and business continuity and coordinate with the appropriate attorneys, CPAs and other professionals when needed.
If you aren’t sure what would happen to your company—or your family—without you, schedule a Business Continuity Review.
We’ll start with the questions.
Then we’ll identify where the gaps may be.