The Boss Dies: the Long Term Plan

In a previous article we discussed how to prepare for the day after you die. In this article we will discuss your long term plan for your company.

If you have a partnership and anticipate one or a group of partners will take over if you pass then this plan should be underwritten by an insurance policy that provides for a buyout at a predetermined price. This price should be reviewed at least annually to make sure it is still appropriate and the insurance plan should be adjusted as necessary. It is likely that you will want to hold the insurance policies personally. You will need to pay income taxes on the premiums but if you do die your family will avoid a huge tax bite. 

If you have a vision for the company when you are gone make sure it is practical. Will the person you choose run your company do it your way or their way. Will they run it for the benefit of the owners of the company or for their own benefit? Is this person capable and willing to run the company? It is very unlikely that your company will run successfully for long if an employee is expected to run the company and provide an income for your family without the benefits of ownership.  If you expect the company to be sold then think through the process and map a plan. If you think it would be better to complete ongoing projects and then liquidate map that plan.

You should have life insurance in an amount to at least cover the outstanding balances on unsecured business loans. You may also want the insurance to cover the cost of hiring a manager to institute your plan.  

If you leave the company to a relative make sure they are capable not only in ability but can they or are they willing to take the time away from their own career or vocation to manage your company.  It is easy to believe that your children are capable of running the company just because you were. Second generation business are nearly always fail because the next generation does not have the ability or the pride of ownership that it took to build the company.

The best thing you can do to assure the long term value of the company  is structure the company with systems and procedures in place that allow the company to run without you. If the company can run without you while you then you truly have a valuable asset and not just a job. It is far easier to sell an asset than a job.

Original content copyright Thomas Robinson 2010