Why You Need a Business Succession Plan

Saturday, June 28th, 2014

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You’ve worked hard to develop your business. What will happen to it if you become ill or die? Does your family’s well being depend on the income from your business? Developing a Business Succession Plan can help.

Phillip ran an airplane replacement parts business from his home. Most of his business was conducted online through a network of suppliers and customers that he had developed over the years. When he suddenly became ill, his adult daughter kept the business going for a while, figuring that Phillip would resume control when he recovered. Unfortunately, Phillip died. His family struggled to keep the business going, but his wife and daughter didn’t know the airplane parts business like he did. The daughter wanted to quit, but was afraid to say anything to her mom.

The stress of running business, while still mourning the loss of their beloved husband and father, was taking its toll on them. Although the income from the business had allowed Phillip and his wife to live comfortably, the daughter was eventually able to convince her mother that, with Phillip gone, she didn’t need that income to support herself alone.

Eventually, one of their suppliers made an offer to buy the business, but not before they’d incurred debt to many of the suppliers and run into some problem customers. They felt guilty selling off “Phillip’s baby,” after all he had invested in it, but they finally had to admit that this was not something they wanted to keep on doing without him.

If Phillip had written a succession plan, he could have identified key individuals who might have been interested in buying the business right away for a great price, when the goodwill and the profits were high. He could have decided the best method of valuing the business to get a fair price, so that his family could reap the benefits of his hard work. His family would have been relieved to know that they were carrying out Phillip’s wishes by selling it, rather than feeling that this was a burden they had to bear to keep his memory alive.

What is your plan for your business? Call me at (619) 607-0235 to start planning now.

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