Death and disability are two conversation-killers that we need to talk about. Today.
The survival of your business and financial security of your family depend on the actions you take before either of these awful events occurs. Once you make a plan, I assure you that:
- *You, your employees and your family members will sleep better at night.
- *You will take enormous steps toward creating a business with value to a buyer or successor.
Estate Planning Isn’t Business Planning
For most business owners, the income we earn from our companies supports our families. If we become disabled or die, that income stops, unless we’ve purchased the proper amount of disability or life insurance and linked it to a carefully conceived estate plan. If we’ve done that, our families are protected.
But what have you done to protect your business?
If you own your business with someone else, your remedy begins with executing a buy-sell (or business continuity) agreement. Of course, we assume that to create that agreement you work with a certified valuation analyst (or other consultant who specializes in valuing businesses) to establish a current business value and set up realistic models to project future business cash flow. Accurate projections are key to the decisions you make about which formula you and your partner will use should either of you die or become disabled before choosing to retire. Keeping that document up-to-date with changes in your company (ownership, value, etc.) is critical if it is to operate as you intend.
If you own your business alone, however, protecting your business does not depend on a buy-sell agreement. Without a partner to purchase ownership, sole-owners must make other arrangements for the continuation (or orderly liquidation) of their companies.
But all of us—sole-owners and co-owners alike—have more issues to think about and plan for than the effect our deaths/disability will have on the cash flow of our companies. Namely,
- *Who is going to replace our talents?
- *How do we assure employees and customers that our death or disability isn’t the death knell for our businesses?
Watch for more on Business Planning for Death or Disability – in the coming weeks.