Every business owner knows, things don’t always go as planned. In the event of one of life’s curve balls — retirement, illness, or other unexpected events — having a comprehensive business succession plan is critical to address any uncertainties, ensuring that your business continues to operate smoothly.
Planning ahead allows for a smooth transition when the time comes to pass on the business to a new owner, family member, or partner. We’ve outlined ten essential steps a couple can take together to prepare for the day the wife may need to run the company — whether as a temporary bridge or as a more permanent solution.
Planning for Business Succession
- Document the company’s operations. Critical business processes, procedures and contacts should be documented in detail, including customer relations, day-to-day operations, agreements with suppliers and financial management.
- Buy “key person” insurance. This insurance on the husband’s life can protect the business against financial losses triggered by his death by covering expenses, repaying some debts and smoothing the leadership transition during business succession.
- Prepare a comprehensive will and estate plan. These instruments can address how business assets will be distributed, ownership interests and management responsibilities. Legal and financial professionals can ensure the plan aligns with the widow’s wishes and legal requirements.
- Review the structure of the business. Determine if its legal structure, whether a sole proprietorship, partnership or corporation, can be adjusted to protect assets and make the succession easier. Legal and tax advisors may suggest incorporating or establishing a trust.
- Establish a durable power of attorney. This document grants the widow authority to make decisions and act on behalf of her husband in case of death or incapacity. It also streamlines many administrative processes and helps with the continuity of business operations.
- Invest in business education. Relevant training programs, workshops and networking events can enhance the wife’s business management knowledge and skills. This knowledge will empower her to navigate upcoming challenges and to make informed decisions at a difficult time.
- Create a detailed contingency plan. A plan that outlines immediate steps to take if the husband dies or is incapacitated unexpectedly can include key individuals who can manage the business temporarily. It can also outline their roles and responsibilities in the event of a business succession.
- Establish a “dream team” of trusted advisors. Build relationships with attorneys, accountants and business consultants who can be trusted to provide support and guidance if and when needed. This advisory team should be reviewed regularly to be sure they remain aligned with the wife’s goals and priorities.
- Establish a formal business succession plan. The plan can outline how ownership and management of the business will be transferred in the case of the husband’s death. It can include provisions to identify and groom potential successors. In addition to the wife, successors might include other family members, time-tested employees or someone from the outside.
- Communicate openly and honestly. Such transparent communication between husband and wife about the business succession, finances, and other plans — especially their concerns, expectations and aspirations — can strengthen their bond and ease her transition to leadership if needed.
Taking these steps proactively while the husband is alive can lay the foundation for the widow to take over the business seamlessly if necessary. Doing so helps mitigate risks, reduces uncertainty and dramatically increases the business’s chances of continued success and sustainability for years to come — or until it is sold successfully.
Getting help to prepare for business continuity
At WH Cornerstone, we realize you can’t know when life will throw you a curve ball, including the loss of a spouse who is a business owner. To make such occurrences more manageable and less devastating, we work with clients to prepare for many of life’s unexpected challenges. We call it Curve Ball Life Planning™.
Open and empathetic conversations are critical to successful planning around business succession — but can be difficult or sensitive for some. We have learned how to facilitate such discussions and convert their output into robust preparations in case an action plan is ever needed. For help with this process, schedule a call with us. We’re here to help.