Imagine your business without you
We often think ourselves invincible. After all, we created great businesses, used our values and judgment to create opportunity and achieved a certain level of success. What would happen if one day everyone woke up and you were gone? Every one of us knows that some day we will move from this journey on earth to another journey, no matter what your beliefs. Will your business survive after you are gone? Will your heirs sell it, keep it, run it? The subject of succession planning is one of the most difficult subjects to face and discuss. In my opinion planning for your death or disability, is the most important discussion you can have relating to your long term plans.
I feel somewhat of an expert in this field, not because I work in succession planning, but because the scenario I describe happened to me four years ago. My husband and I had a small accounting practice with 5 employees focused on automotive dealerships. His health had not been great over the last years of his life but certainly never life threatening issues. We were embarking on a very busy tax season, when the unthinkable happened, he died. It was a beautiful February morning and I will never forget the unshakable grief that I felt that day and many more days after.
After going to the office and letting our staff know that the unthinkable had happened, I had to formulate a plan that would allow me to move forward. It was essential to me to figure out a way to keep all of the employees around and secure their future with any plans that I made in those early days. We had built a dedicated, loyal team focused on exceptional customer service and I didn’t want to lose any of our team members.
To many observers, I was all business and they were quite candid in telling me I did not take enough time off to grieve. I wanted to scream that time was not a luxury I had in my life. I suddenly had a million things to do and a short amount of time to do them. I had to contact all of our clients and explain over and over what had happened so suddenly. It was exhausting but I had no choice. Our lack of succession planning had left me no choice but to move forward quickly.
I was lucky, although we had no formal plan in place, we did have an offer to buy the practice on the table. The firm that had interest in buying our practice still wanted to buy it and they did not change their offer by one dollar. They could have. The partners of this firm are men with integrity and they always dealt with me in a professional manner and were unbelievably helpful to me. I am forever grateful as this deal could have went in such a different direction.
I call myself lucky because our business being a service business is all about relationships. Our business was only as good as the relationships that we had made over the years. I had to let clients know that I was capable of moving forward in the short term and I had a plan for the long term. Most of the clients stayed because they knew me, I was directly involved in the day-to-day operations of the business. Some clients were extremely nervous and left. Some left without any warning. I was disappointed that I lost even a single client but I also understand that some people were caught so off guard, they moved in a direction in which they felt comfortable.
I think all business owners need to ask themselves the tough questions about their business surviving a crises. I believe the answers will lead you directly to a succession planning session with your advisors.
- Could your business survive without you?
- Is your family interested or even working in your business?
- Does your family have a plan in place in the event you are disabled or die?
- What about your employees?
- Would a plan keep them employed even after your death or disability?
- How would your competitors conduct themselves?
- Would they steal your clients/customers?
- Would they offer your heirs cents on the dollar for your business?
- Would they fire or lay off all your employees?
- Does your business require special licenses that would die with you?
- What taxes, if any will your family have to incur upon your death?
- Do you have a CPA, lawyer or other representative that you trust to guide your heirs through any transition?
The most important thing that I can share with all small business owners is that succession planning is one of the most important things you can do for your business. It is a necessity and you will need the guidance of your advisors, CPA and lawyer. Believe me it will be money well spent for your family and your clients/customers.
GYL is a full service CPA practice located in Ontario, CA and has helped many clients avoid catastrophe by advising on smooth transition in the circumstances described in this article.