Mind your own business – Succession planning
March 10, 2011
By AL BRILL
In my last article I discussed the importance of saving and categorizing receipts.
Today is Part One of several articles dealing with “What happens if I get hit by a bus today?” or “Are my affairs really in order?”
This topic bridges both your personal and business activities. I’m not the first to look at this nor will I be the last.
Let’s start by looking at a business owned by either the husband or wife with little, if any, participation by their spouse.
Start writing down all kinds of information that only you know about; things like bank account numbers, credit card numbers, passwords for computers, and for the bank and credit card accounts that you have listed, and anything else that you can think of that while you do it by rote on a regular basis, that no one else would know about.
Compile a list of your professional services contacts such as accountants, attorneys, software developers etc.
Compile a list of your vendors and any specific information about them, including a short list of your preferred vendors.
Compile a list of your prime customers and any specific information about them.
Clearly if you are a dentist, electrician or other professional or tradesperson and your experience, expertise and/or license is critical to the business, you must have a trusted friend with that same expertise or license to help your surviving spouse manage the practice or business until it can be sold. You should attempt to set a fair value for the practice or business and a “distressed” value as well, and that value should be reexamined on a yearly basis. Bear in mind, the more information like this you can provide to your spouse the better his/her chances are to get a fair price for the business.
All of this information should be compiled, indexed, printed and put into a standard three-ring binder. In addition, it should be in a file on a readily accessible computer. This file and binder should be reviewed every six months and updated if needed.
You should also write a letter to your loved one expressing your thoughts and reasons for what you think should be done with the business. If it’s a professional practice (Dentist, Physician etc) check to see if there is an organization that provides Locum Tenens services so that the practice can continue its existence while it is being listed and sold. Speak with them to gather the details of their service and be sure your spouse understands how to get in touch with that service and knows what the service might cost.
If the business is a trade (e.g. electrical contractor) talk to other tradesmen who can fill in for you so that the business assets can be sold.
Your spouse should have as much information as possible so that he/she knows what to do to keep the business afloat until it can be sold.
Now, let’s look at a business that is owned by both a husband and wife and each typically deals with some aspects of the business. Here the answer is pretty obvious and that is to share more of the total work so that each of you has at least a basic idea of what the others’ duties are.
While this situation is different from the first one described, it is still a good idea to get everything you do down in writing with phone lists of important contacts.
Other decisions to be made center on the current ownership structure and a succession plan.
Do you have children that participate in the day-to-day operation of the business?
How have they contributed to the success of the business, if at all?
Are they qualified to run the business?
Would you want the business sold or passed on to your heirs?
Do your heirs know about your thoughts on this matter?
And finally, what percentage of your total net worth does the business comprise?
This is Part One of several article on this subject.
If you have any questions, comments, or ideas for future columns, please feel free to send an email to firstname.lastname@example.org.
Al Brill is life-long entrepreneur with years of experience in computers, marketing, and business consulting.