Creating a Business Succession Plan does take time and thoughtful reflection. So why all the fuss? It’s worth all the effort because it’s about the importance of stabilizing your business and maximizing its’ value. It’s all about transferring your life-long efforts in the most secure manner possible, creating a viable and profitable market for what might otherwise be an unmarketable business. Furthermore, this plan helps assure that you realize the full value of your business and provide maximum financial security for you and your family in the event of a possible disability, retirement, death and other possible setbacks. Perhaps the best way to drive this point home is to relate a story.
There was a store in downtown Schenectady named Arnold’s Optical. Arnold ran the business with the help of a long time manager, Peter, and two part time summer employees. The business provided a good living for both Arnold and his wife, Sara and their two young children as well as Peter and his growing family.
Arnold was from the old-school; working night and day in his business but never took the time to make sure the business would survive him. When Arnold had a heart attack and died a few days after, his family was hit with the emotional trauma of his unexpected death. They were also staggered with economic problems that often seemed insurmountable.
At first, Sara tried to run the business. However, she was never involved in the day to day operations while Arnold was alive and also lacked his technical expertise. When she realized she needed help, she hired a semi-retired, part time optician and offered Peter a raise in pay to maintain goodwill and keep the business going. Unfortunately, she had to withdraw most of the company’s working capital to pay state death taxes, loans, and medical expenses not covered by Arnold’s insurance. Essential summer business inventories dropped and as a result sales significantly plummeted.
Peter, figuring it was only a matter of time until the business went bankrupt and lost his job, quickly accepted a job at a competitor’s business. Sara had to sell the remaining inventory for less than 50 cents on the dollar.
Sadly, this scenario plays out frequently in our area and all over the United States. This story was never intended to scare you. It is written to help you realize that things in life happen and that it’s crucially important to plan ahead.
So lets begin to write your business succession plan so that you can comfortably grow your business, relax and know that a plan is in place.